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

To: The Duke of URL© who wrote (95050)	2/1/2002 2:37:57 PM
From: Elwood P. Dowd	Read Replies (2) \| Respond to of 97611

An interview with Weird Wally: Posted at 10:16 p.m. PST Thursday, Jan. 31, 2002 Q&A with dissident HP board member Walter Hewlett Walter Hewlett is the most celebrated corporate renegade of the moment, traveling the country urging investors to vote down Hewlett-Packard's $23.6 billion proposed acquisition of Compaq Computer. The son of HP co-founder Bill Hewlett, Walter Hewlett sits on HP's board and voted for the deal as a director. But in November, he announced his intention to fight the plan. In an interview this week with Mercury News Staff Writer Michelle Quinn, Hewlett explained why he opposes the deal, his history with HP and the likely outcome for HP Chief Executive Carly Fiorina if his shareholder revolt succeeds. This is an edited transcript of that interview: Q You've been talking to investors the past couple weeks. What kind of reception are you getting? A I think we're really getting traction. A lot of these investors don't want to say what they are going to do. There are still several weeks before the vote so people are in the data-collecting stage. But we have found these shareholders to be very thoughtful. They really understand the points we're making. Q You have not only come out against the merger but have chosen to be a real activist in stopping it. Why? AI really believe that if this merger goes ahead, the stock price will go down and stay down. I'm one of the trustees of the Hewlett Foundation. The Hewlett Foundation (and the Hewlett Trust) together have 109 million shares of HP, roughly half of their total endowment. It will have a dramatic effect on their programs if these shares go down. I think other shareholders, when they really understand what is involved here, will feel the same way. They don't want to see their assets deteriorate, either. Q You sit on HP's board and were there for all the discussions last summer about the merger. You even voted for it, although you say you told the directors you were against it. Then, you said you would actively oppose it. What happened? A In May 2001, Carly told the board that Compaq had come to HP and said they would like to be acquired. And her question was, `Should we pursue this?' I told the board -- because she polled every one of us -- that I did not think this was a good idea. This, of course, was without any analysis, a reaction as seen from 40,000 feet. My concern was that if you put those two companies together, you have a much bigger company, where a large portion of it is in a commodity business which is currently under attack by a very strong competitor. Not only that, I was on the board in 1989 when HP acquired Apollo. We had 20 percent of the market, Apollo had 20 percent and Sun had 20 percent. By buying Apollo, we would be the big gorilla, we would have 40 percent of the market. When the dust cleared, we ended up with 20 percent. We got nowhere. So I have direct experience how difficult these mergers can be. QOne of HP's criticisms is that you do not have a better idea for what the company should do. When you go and see investors, what are you telling them? A I'm telling them that plenty of alternatives exist. That the board should direct management to revisit the alternatives. And for management to imply that standing still is their only alternative is a real abdication of their responsibilities. Q In its campaign, HP has invoked the names of David Packard and your father. Are you offended? A I'm not offended. There's no point in being offended. Q Do you plan to remain on HP's board, even if you lose this battle? A My expectation is that I will be nominated. I will stay on the board. Q Are you concerned that if the merger gets voted down, some executives and board members may resign, leaving the company vulnerable? A I've been talking to a lot of thoughtful observers of this process. What I'm hearing is that it is unlikely Carly will stay if this is turned down. She has staked her career on this. And there is some question about her ability to lead the employees of this company after this thing has been turned down. As far as the rest of the management goes, I'm confident that they would stay. They are professional people, very capable. HP does not personalize these things. There are no recriminations. Q Do you think Carly Fiorina should leave? A I'm trying to get people to focus on the transaction. It's a bad transaction. Q Well, what about the $2.5 billion in savings HP says it can make? Could HP be stronger if it can execute the merger? A I think that the opposite is more likely: There will be greater losses and it would endanger HP's crown jewel, which is its printer and imaging business. Q HP also says that you do not have enough of a business background, especially compared to the other people on the board. A I have been a close observer of Hewlett-Packard for more than 50 years. I have been on the board for more than 15 years. I have worked for the company on three separate occasions (the summers of 1964, 1967 and 1970). I really understand HP. -------------------------------------------------------------------------------- Contact Michelle Quinn at mquinn@sjmercury.com or (408) 920-5749.