=DJ With Deal Set To Close, Analysts See H-P Shares Pressured
By Bob Sechler Of DOW JONES NEWSWIRES
AUSTIN, Texas (Dow Jones)--Wall Street was finally able to view the merger of Hewlett-Packard Co. (HWP) and Compaq Computer Corp. (CPQ) as a foregone conclusion Wednesday, and the spread between the ratio of the companies' stock prices and the merger ratio tightened considerably.
But analysts said H-P shares are likely to face rough sledding over the next several months as the difficult work of actually combining the two computer-industry behemoths gets under way.
In addition, H-P is scheduled to release its fiscal second-quarter earnings on a stand-alone basis later this month, and some observers say the results likely will reflect difficult industry conditions as well as the impact of some merger-related distractions.
"We believe the stock will be under pressure (in the near term), which may be heightened by the delay in the closing, and the pending publication of H-P's April quarter on a stand-alone basis," J.P. Morgan Securities Inc. analyst Daniel Kunstler said in a research note.
Others agreed, saying the company still faces significant integration risk, not to mention a "merger-related hangover."
The spread between H-P and Compaq stocks tightened Wednesday. H-P shares were recently off 4.3% at $16.37, while Compaq shares were up about 1.5% at $10.31.
One thing analysts and investors were able to forecast with certainty Wednesday is that the $18 billion merger will take place. Analysts said they expect it to close by May 7, with certification of H-P's final shareholder vote tally coming within a couple days.
Late Tuesday, a Delaware state court dismissed a lawsuit by dissident H-P shareholder Walter Hewlett seeking to overturn a preliminary vote tally that showed H-P shareholders had narrowly approved the deal. Walter Hewlett has said he won't appeal the ruling, which apparently clears the final hurdle for the merger to close.
(MORE) DOW JONES NEWS 05-01-02
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