HP Chief Pressed to Explain Bank Call
WILMINGTON, Del., Apr 25, 2002 (AP Online via COMTEX) -- Hewlett-Packard Co. chief Carly Fiorina was called back to the witness stand Thursday to explain why she told a big investor its vote on the proposed acquisition of Compaq Computer Corp. was "of great importance to our ongoing relationship."
The comment was made in a last-minute presentation Fiorina and HP chief financial officer Bob Wayman made to Deutsche Bank investment managers just before HP's March 19 shareholder vote on the Compaq deal began.
In a dramatic and combative sequence on the final day of a three-day trial, Fiorina - who already had testified for seven hours Tuesday and Wednesday - was called back up to discuss the Deutsche conversation because a tape recording of the call did not become available to attorneys in the case until Wednesday.
"We very much appreciate your willingness to listen to us this morning," Fiorina told the Deutsche money managers as she concluded the call, according to a transcript read by Stephen Neal, an attorney for dissident HP director Walter Hewlett.
"This is obviously of great importance to us as a company. It is of great importance to our ongoing relationship. We very much would like to have your support here. We think this is a crucially important decision for this company."
Walter Hewlett is suing the company in hopes of overturning the shareholder vote because he believes HP misled investors about the progress of its merger plans and improperly coerced Deutsche Bank to support the deal after it originally intended to reject it.
Fiorina has said no such pressure was applied, even though Deutsche Bank was performing a variety of investment banking services for HP at the time.
She defended the "ongoing relationship" remark, saying it is a common way to speak to an investment bank, particularly one such as Deutsche Bank, which buys computer equipment from HP in addition to providing financial services.
HP lawyer Boris Feldman, who complained that Neal was standing too close to Fiorina as he showed her the transcript, denounced Neal for implying that Fiorina threatened Deutsche Bank.
"So this is what the bribery case comes down to now," Feldman said sarcastically.
Neal did have more ammunition - communications between Deutsche Bank officials.
In an internal call recorded March 19, Dean Barr, chief investment officer for Deutsche Bank Asset Management in New York, said to the proxy team that controlled Deutsche's vote on its shares: "You may or may not be aware we have an enormous banking relationship with Hewlett-Packard. ... Obviously if you don't want to change your vote, that's your call. I would suggest to you, and I'm not trying to put undue pressure, but make sure that you have a very strong documented rationale for why you voted the way you did as it relates to this merger. This is extremely sensitive to people like (two Deutsche Bank officials)."
According to the official court transcript, a German representative replied to Barr: "I don't want to be smarter than you people in New York, so if the majority of you come to the conclusion that it's better for our customers to vote in favor, I tried to change our vote here, but I have to see what I can overcome. All the technical problems. I have to react very quickly."
A Deutsche Asset Management spokeswoman did not return a call seeking comment. It has said it voted for the deal in the best interests of its investment clients.
A preliminary tally released last week found that 51.4 percent of HP shares were voted for acquiring Compaq, with 48.6 percent against. That amounts to a lead of 45 million shares - which means Chancery Court Judge William B. Chandler would have to do more than erase Deutsche Bank's 17 million votes to overturn the deal.
Chandler said at the end of Thursday's hearing that he expects to rule quickly, though he did not offer a specific time frame.
Hewlett's lawyers tried to prove that in addition to the Deutsche Bank vote, the entire proxy campaign was corrupted by HP's refusal to release updated internal projections showing the merged companies falling far short of their publicly disclosed financial targets.
Fiorina and Wayman testified that the documents showing the shortfalls were taken out of context, and drawn up by HP and Compaq managers with incomplete information.
Hewlett's side also introduced internal memos from Compaq chief financial officer Jeff Clarke calling the projections "ugly" and "a disaster" and saying the integration team had "a mile to go."
But Clarke testified Thursday that those comments were also taken out of context; he called them motivational messages. Echoing testimony made by Fiorina, Clarke said HP and Compaq are more confident than ever the merger can be a financial success. For example, Clarke said, $3.5 billion in cost savings are possible by 2004, well ahead of the publicly touted figure of $2.5 billion.
In trading Thursday on the New York Stock Exchange, shares of Palo Alto, Calif.-based HP rose 17 cents to close at $17.38. Shares of Houston-based Compaq gained 10 cents to $10.46.
That marked the second straight daily decrease in the "spread" - the difference between Compaq's stock price and the price implied by the terms of the acquisition. Traders monitoring the case said the shrinking spread reflected Wall Street's increasing confidence that the Compaq acquisition will go through because Hewlett failed to prove his case.
---
On the Net:
hp.com
compaq.com
Opposition site: votenohpcompaq.com
By BRIAN BERGSTEIN AP Business Writer
Copyright 2002 Associated Press, All rights reserved |
