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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: tonyt who wrote (94347)	12/19/2001 8:24:05 PM
From: Elwood P. Dowd	Read Replies (1) \| Respond to of 97611

Hewlett-Packard, Compaq Pan HP Heir's Criticism By Peter Henderson and Caroline Humer SAN FRANCISCO/NEW YORK (Reuters) - Computer makers Hewlett-Packard Co. (NYSE:HWP - news) and Compaq Computer Corp. (NYSE:CPQ - news) on Wednesday struck back against criticism from HP heirs and launched a high profile advertising campaign to rally support for their controversial merger, the industry's biggest. Hewlett-Packard Chief Executive Carly Fiorina and Compaq Chief Executive Michael Capellas issued their first public and detailed rebuttal to the case against the merger put forward by Walter Hewlett, a son of founder Bill Hewlett and a dissident HP board member who has turned against the plan. ``We believe his recent opposition to the merger is based on a static and narrow view of HP and the industry, selectively ignores the synergies of this transaction, relies on faulty financial assumptions and analyzes, and offers no alternatives to address HP's challenges and opportunities,'' they wrote. Hewlett-Packard published a nearly 50-page presentation for distribution to investors which laid out in detail its cost saving expectations and showed why it believes revenue will not fall more than 5 percent after the $22.2 billion merger. It also took out double-page advertisements in the New York Times and the Wall Street Journal arguing for the benefits of the merger and the need to ``embrace change.'' With the shareholder vote not expected before late February, analysts say the battle is only going to get more intense as both sides try to sway investors to their sides. ``The only thing that's going to stop this from getting to be the worst prime-time soap opera in the IT industry ever is if the companies decide to go to different plans. They either structure a new deal or abandon the deal and go to Plan B,'' said Tom Austin, vice president at Gartner Inc., a consultancy. DEAL ``DEFINITIVE'' But the chief financial officers from both companies stuck to their guns. ``It is a definitive deal,'' Compaq's Jeff Clarke told Reuters in an interview. HP's Bob Wayman said there were no plans to change, even though is was possible. ``The terms of the deal were designed to withstand some of the pressures that one can anticipate in this. It was designed to be a strong commitment from both companies to proceed,'' he said in the same interview. Members of the founding Hewlett and Packard families have united in opposing the deal and hold 18 percent of HP stock. Wayman said the rebuttal was not directed at Hewlett, who has led the opposition to the merger, but at the logic of his argument, which the company presentation released Wednesday says betrays a ``simplistic anti-merger bias.'' ``We are not trying to take a shot. We are trying to clarify for investors what we think is a more rational set of assumptions and analysis that they should be using in their deliberations,'' he said. Hewlett, who sees the deal cutting the value of HP's printer franchise, bloating the PC division and scaring away clients, has predicted a total 10 percent drop in revenue after the merger, double HP's own forecasts. HP said it expected sales to fall in about half its businesses which are deemed ``at risk,'' ranging from 5 percent of data storage revenue to 18 percent of home personal computer sales. Since printers and services are not at risk, Hewlett's loss assumptions are too high, HP argues. Lehman Brothers analyst Dan Niles said he had come to favor the merger in the three months since it was announced. SOME FOR, SOME AGAINST ``Since that time I kind of see how this thing could work,'' he said. ``I agree with a lot more of the HP stuff than I do with the Hewlett stuff.'' But he said the merger probably would not go through. Hewlett-Packard and Compaq have yet to show substantial support among major investors, and Walter Hewlett said market reaction had proved his point. ``Mr. Hewlett has been visiting with investors and has been very well received. We believe that it is HP that relies on faulty financial assumptions and analysis,'' a spokesman said. Gartner's Austin said HP would have been better served by proving support with its national ad campaign. ``I would really have been a heck of a lot more impressed if this was a list of the institutional shareholders who had committed to vote for the deal,'' he said. Wayman said investors were still making up their minds. ``These institutional investors need to behave responsibly. They do not have final information. You should not expect them to be giving a view at this point in time,'' he said. Hewlett-Packard shares rose 20 cents, or about 1 percent, to $20.70 and Compaq fell 9 cents to $9.02 on the New York Stock Exchange (news - web sites).