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

To: Night Writer who wrote (95194)	2/11/2002 1:51:10 PM
From: Night Writer	Read Replies (1) \| Respond to of 97611

HP-Compaq Merge War Heats Up Feb 11, 2002 (The Boston Globe - Knight Ridder/Tribune Business News via COMTEX) -- The war over Hewlett-Packard Co.'s proposed merger with Compaq Computer Corp. took on a new ferocity last week, as the two companies scheduled shareholder votes next month on the $24 billion deal, and HP chief Carly Fiorina traded high-profile potshots with dissident HP board member Walter Hewlett. The intensity of the fight underscores an emerging consensus that the deal, once given up for dead by financial pundits, is still very much alive. "People were betting that they wouldn't even bother taking it to a shareholder vote a few months ago," said Linda Varoli, analyst with Merger Insight in New York. "They've definitely made some progress. Whether they've made enough is still an open question." The deal seemed to be mortally wounded last year when Walter Hewlett, son of the company's cofounder, reversed his previous support for the merger. The other founding family, the Packards, soon followed suit. First, David Packard said he'd vote his 1.3 percent of HP stock in opposition to the merger. Then Packard's sister, head of a Packard family foundation which holds 10 percent of HP stock, also decided to oppose the merger. The Hewletts and Packards haven't changed their minds, insisting that HP's leadership in the high-margin computer printer business will be diluted by merging with Compaq's line of low-margin personal computers. "We just think that, strategically, the company is fine the way it is," said George Vera, chief financial officer of the Packard Foundation. "It's our view that HP is a strong company, that it's not in crisis," said Todd Glass, spokesman for Walter Hewlett. "This transaction would more than double HP's exposure to the PC business. That, in Mr. Hewlett's view, would be a crisis." But defenders of the deal are finding their voices. Peter Mercury, general manager of Compaq's global services business, said the merger would make his company a major player in computer services, as well as printers, scanners and high-end business computers running Microsoft Corp.'s Windows software and the advanced Unix operating system. "If you are HP, do you believe you're better off going it alone... or better off expanding your portfolio capabilities?" Mercury asked rhetorically. Meanwhile, Fiorina has adopted a high-profile campaign to win over shareholders, including full-page newspaper ads and speeches to financial analyst groups. She's also delivered good news about the company's financial health; last week HP announced it was raising its fiscal targets for the first quarter of the year. The company had previously predicted that sales for the quarter would be lower than for the fourth quarter of 2001, but it now expects an increase. Moreover, HP expects to beat the consensus profit estimate of 16 cents a share for the quarter. In addition, the deal overcame a major legal hurdle in late January, when antitrust authorities for the European Union gave their approval to the merger. HP shareholders will vote on the deal March 19, while Compaq investors will vote the next day. By Hiawatha Bray To see more of The Boston Globe, or to subscribe to the newspaper, go to boston.com (c) 2002, The Boston Globe. Distributed by Knight Ridder/Tribune Business News. -0-