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

To: Jerome who wrote (95216)	2/12/2002 11:58:17 PM
From: Elwood P. Dowd	Respond to of 97611

H-P earnings could swing merger vote Fiorina sees lesson in expected above-consensus results By Mike Tarsala, CBS.MarketWatch.com Last Update: 11:42 PM ET Feb. 12, 2002 PALO ALTO, Calif. (CBS.MW) -- Hewlett-Packard is poised to report better-than-expected earnings Wednesday in what could help sway some shareholders to vote in favor of its pending merger with Compaq Computer. The timing for a great H-P quarter couldn't be better for the company's management team, which is waging a bitter fight with dissident board member Walter Hewlett, son of H-P co-founder William Hewlett, to decide the fate of its blockbuster $22 billion merger. It's almost a foregone conclusion that H-P will sail past Wall Street's average fiscal first-quarter earnings target of 25 cents a share, on sales of $11.18 billion. Carly Fiorina, chief executive of the Palo Alto, Calif.-based printer and computer-maker, said last week that earnings for the January quarter will exceed analysts' targets due to stronger-than-expected consumer sales. In a speech, Fiorina used her earnings pre-announcement to claim a victory in what's been a period of limbo for the company. She added that H-P is turning the tide in its merger battle. A string of recent positive earnings updates and announcements issued by H-P and Compaq "proves what the people of these two companies can accomplish," Fiorina said. "We aren't distracted by the merger or the challenge of integration. "And our customers aren't defecting. Our shareowners can be assured that we are on a path toward enhancing, not losing, shareowner value." During the company's fiscal 2003 first quarter, members of both the Hewlett and Packard founding families representing about 18 percent of shareholders came out against the merger. Meanwhile, analysts and the media relentlessly questioned Fiorina's management skills, her ability to complete the merger and her job tenure. Battle for hearts and minds But some analysts now say that management at H-P and Compaq are making inroads with the institutional shareholders that will decide the largest chunk of the shareholder vote. Institutions own about 57 percent of H-P shares, while individuals control roughly 25 percent. Family members have the rest. A positive earnings report, coupled with higher earnings and sales targets for future quarters, could help build clout for H-P's management, possibly convincing institutional and individual investors to vote yes on the merger. Two factors, said SG Cowen Securities analyst Richard Chu in an interview earlier this month, are helping improve the merger's chances -- gaining regulatory approval for the deal in Europe, as well a rise in H-P shares since the start of November. While many eyes will be focused on how earnings could influence the merger outcome, analysts will remain fixed on how H-P's management characterizes business for its April period. It remains to be seen if executives will raise targets for the second quarter. Analysts polled by Thomson Financial/First Call expect earnings of 24 cents a share on sales of $11.95 billion. It also remains to be seen if H-P's management will compare most of its first-quarter sales statistics with its strong year-ago period, or the far-weaker quarter it reported in October. For the previous period ended in October, H-P's net income dropped 89 percent from the same period last year, due to lower demand for the company's computers. Net income was $97 million, or 5 a share, down from $922 million, or 47 cents a share, in the year-earlier period. But after excluding a $282 million pre-tax restructuring charge related to job cuts and other items, H-P earned 19 cents a share in the October quarter. Analysts had expected earnings of 8 cents, on average, according to a First Call survey. Shares of H-P (HWP: news, chart, profile) fell 8 cents to close at $20.77 in Wednesday trading on the Big Board. Compaq (CPQ: news, chart, profile) fell 42 cents to $11.12. Mike Tarsala is a San Francisco-based reporter for CBS.MarketWatch.com