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

To: Elwood P. Dowd who wrote (95528)	2/27/2002 9:52:18 PM
From: Jerome	Read Replies (2) \| Respond to of 97611

>>>Barclays turned over its decision to ISS because its chief executive, Patricia Dunn, is a member of H-P's board.<<< This is a strong clue on how ISS will decide. As a board member that favors the merger, why would you turn your share vote over to some one who would vote against you?

To: Elwood P. Dowd who wrote (95528)	2/27/2002 11:56:29 PM
From: PCSS	Respond to of 97611

<ISS Report On HP-Compaq Merger Expected Early Next Week ...> Me believes that ISS has delayed its opinion & is trying its best to take ALL into consideration including today's HWP (and Carly) Analyst Meeting, its presented projections/facts opinional impact, as well as, the potential (if not already completed by Mon) Govt approval. In all ... my take (as of now) seems that ISS will give its blessing (or at least 75% blessing) Carly is doing her job excellently and w(h)inning people over (sans Wierd Wally)

To: Elwood P. Dowd who wrote (95528)	2/28/2002 6:17:03 PM
From: hlpinout	Respond to of 97611

HP Execs Say Compaq Integration Plans Well Under Way By Steven Burke CRN New York - 11:31 AM EST Wed., Feb. 27, 2002 Hewlett-Packard's top services and computer executives told Wall Street analysts Wednesday that HP and Compaq Computer are well down the path of integrating the two companies. Ann Livermore, president of HP's services organization, said Wednesday that the two companies have already developed detailed business strategies that will be put into place if the merger is completed. Shareholders will vote on the controversial transaction on March 19. The integration is complete for all services lines of business including outsourcing, consulting and customer support, she said. A team of about 60 people from both organizations has been working on combining the two companies' services arms. The top goal in the midst of this complicated project is to make sure the combined company maintains its focus on meeting commitments to customers, Livermore said. Livermore said the cultures between the two services organizations are very similar, "so much so, if I were to close my eyes at these meetings, I couldn't tell you if it was an HP employee or a Compaq employee speaking." Livermore said she has met face to face with about 80 percent of HP's 30,000 services employees. Head-count reduction goals and IT plans have been formulated for each line of business and are ready to be given to managers so that on day one, the company can hit the ground running, she said. She added the companies have completed the discovery phase, looked at best practices, chosen "a go-forward plan" and constructed a detailed road map. In the case of the companies' respective spare parts businesses, for example, the team has already decided how many distribution centers will be consolidated, chosen IT systems and finalized migration plans and logistics partners, Livermore said. "We have an aggressive adopt-and-go strategy" she said. That task is made somewhat easier because both companies use SAP and Clarify enterprise applications, she added. Livermore further noted that HP will put in place service managers in each geography within weeks of a merger vote, so issues will be dealt with quickly. Employees at both companies are "fired up" to be part of what will be the third-largest services company, Livermore said. HP is currently ranked eighth. Duane Zitzner, president of HP's Computing Systems group, said his group has likewise formulated detailed post-merger plans. Decisions have already been made on product road maps and customer transitions. He promised that a detailed playbook for field management will be available within several weeks of the merger if it is approved by shareholders. In an interview with CRN after his presentation, Zitzner said that the company will continue to make both Compaq and HP high-end enterprise systems that are already in customer use available for some time. "The big equipment will stay around for years," he said. Zitzner said he is hopeful the PC business will pick up in the second half of the year, and even though the combined company will build an aggressive direct distribution capability it will still rely heavily on distributors. The merged company has to do more in direct sales to compete with Dell Computer and keep that company from making more inroads, he said. "Dell has done a great job in the PC business. You have to give them credit. But they are not there in the data center," he said.

To: Elwood P. Dowd who wrote (95528)	2/28/2002 6:18:41 PM
From: hlpinout	Read Replies (1) \| Respond to of 97611

C.S. First Boston says IT spending, more than Compaq merger, key to Hewlett-Packard stock performance in tech notes 2/28/02 02/28/02 08:55 AM Source: CS First Boston Hewlett-Packard (HWP-$20.03-Cap $38.8B-Hold) Kevin A. McCarthy / Michael R. Walker HP Hammers Home Merger Points FY02E: $1.20; FY03E: $1.35 * During its semiannual analyst meeting yesterday, HP focused much of its presentation on the attributes of the proposed HP/Compaq merger. HP shareholders will vote on the merger on March 19th. Odds of a positive vote remain 5 points either side of 50-50, in our opinion. * HP did not alter its analysis of the deal. That is, HP believes the deal would be accretive to earnings in fiscal 2003 and 2004 and the combined company would be a stronger competitor in many key business segments including; services, enterprise systems, storage and PCs. HP estimates 12% upside to the Street’s fiscal 2003 earnings estimate on a pro forma basis and further accretion in 2004. * HP insisted that the PC business is a good business capable of generating just 3% operating margins but mid 20% ROIC due to improved inventory turns thanks to Compaq’s more direct distribution capabilities. * HP has put its best-case forward leaving the shareholder the final arbiter. HP’s stock, as well as those stocks of other leading technology suppliers, will be more impacted by the pace of commercial IT spending over the next 6-12 months than by a yea or nay vote on the proposed acquisition, in our opinion.

To: Elwood P. Dowd who wrote (95528)	2/28/2002 6:25:27 PM
From: hlpinout	Respond to of 97611

HP CFO: Accounting Procedures Shield Company From Issues By Edward F. Moltzen CRN New York - 1:56 PM EST Wed., Feb. 27, 2002 Hewlett-Packard's CFO defended the company's most recent quarterly results and said the decision last year to report more detail on its finances has protected it from accounting issues that have hit companies such as IBM and Computer Associates International. HP CFO Robert Wayman said the company did nothing different in reporting its most recent quarterly earnings in an effort to boost its merger efforts with Compaq. Wayman said HP decided last year that it would report more information, rather than less, as it pursued its deal with Compaq. "We instructed all of our people to be extra conservative in any judgment call," Wayman said. Responding to suggestions from some financial analysts that HP would go out of its way to report good earnings as a means of helping the merger, Wayman said that was pointedly false. "I feel very good about the quarter," Wayman said. Asked if the company would change any of its accounting or reporting procedures if the merger with Compaq is approved, Wayman said it was too early to say. But he also suggested the company would err on the side of reporting more details of its finances.

To: Elwood P. Dowd who wrote (95528)	2/28/2002 6:27:17 PM
From: hlpinout	Respond to of 97611

Fiorina Not Ruling Out Acquisition Of Services Company By Steven Burke CRN New York - 6:20 PM EST Wed., Feb. 27, 2002 Even though the Hewlett- Packard-Compaq Computer merger isn't a done deal, HP Chairman and CEO Carly Fiorina is not ruling out a further acquisition of a services company that could help the combined computer giant build a stronger presence in the outsourcing or network/services management arena. In a question and answer session with money managers and analysts on Wednesday, Fiorina stressed that outsourcing is a great growth market that is very fragmented and provides high margins and great opportunity for HP. "There may be opportunities, and we will approach them opportunistically to take advantage of the consolidating nature of the outsourcing market," she said. Those are big words coming from the CEO who pursued the purchase of consulting firm PricewaterhouseCoopers only to have that deal evaporate and who now faces a tough fight cementing the proposed $21.8 billion HP-Compaq merger. HP attempted to buy PWC Consulting 18 months ago. Fiorina said she walked away from the deal because she couldn't "get it priced or structured right." The combined HP-Compaq will be the No. 1 systems supplier to systems integrators and consulting giants such as Accenture, KPMG and PWC, she said."When we put this company together, we are the leading partner from day one," she said. When one analyst noted that that is reminiscent of Sun Microsystems' strategy, Fiorina said Sun has "figured it out" and is taking the same strategic path. "With all due respect to Sun, they are very focused on the Unix business while we are a broad-based system supplier," she said. Fiorina noted that HP is a minority partner in one outsourcing deal and may take a majority stake in such a contract. Such acquisitions, she stressed, would be much smaller than the HP-Compaq deal, and "we feel comfortable if we can get it integrated effectively." She warned analysts that she did not mean to say the company will turn around in six months and do such deals.

To: Elwood P. Dowd who wrote (95528)	2/28/2002 6:33:40 PM
From: hlpinout	Respond to of 97611

Market Report -- Short Stories (HWP, CPQ) February 28, 2002 2:13:00 PM ET Hewlett-Packard (HWP) 20.08 +0.05: -- Before Open -- HWP's analyst meeting yesterday presented mgmt's rationale for the CPQ merger; analyst opinion remains highly divided. Merrill Lynch is in favor of the CPQ acquisition and agrees with HWP's calculation that savings could exceed $2.5 bln with revenue loss limited to 5%; notes that the stock looks inexpensive if HWP can achieve earnings of $1.50 in 2003 (including 12% earnings accretion from CPQ). Bank of America sees the merger as viable long-term but does not believe it will pass; their updated voting analysis (which includes institutions that have declared publicly) suggests that 66% of remaining institutional shareholders must vote "yes" for the deal to pass. UBS Warburg does not find the merger's strategic rationale to be attractive; believes HWP remains attractive from a valuation perspective but finds the future potential revenue mix of a combined HWP/CPQ to be far less attractive with printing & imaging declining into the mid 20% range of revenues and PCs increasing to approximately 30% of revenues.

To: Elwood P. Dowd who wrote (95528)	2/28/2002 6:36:57 PM
From: hlpinout	Read Replies (1) \| Respond to of 97611

HP heir hints at share sale over Compaq deal By Scott Morrison in New York Published: February 28 2002 20:50 \| Last Updated: February 28 2002 23:03 Walter Hewlett, the dissident Hewlett-Packard board member, hinted on Thursday he might sell his holdings in the company if the management succeeded in its $22bn bid to acquire Compaq Computer. Mr Hewlett, son of one of HP's co-founders, said: "I think this is a very bad thing for the company if this thing goes ahead." He said the Hewlett Foundation, the charitable group set up by his father, which remains one of HP's top share-owners, would probably reconsider its investment strategy if shareholders approved the deal. Mr Hewlett has argued that negative market reaction to a deal suggested that approval by shareholders would result in an immediate $5 drop in the net value of HP shares. Mr Hewlett said: "If it goes down $5, the foundation suddenly has $550m less of an endowment and stock in a troubled company." That would amount to a material change that would prompt the Hewlett Foundation to "revisit" its investment strategy. The foundation holds 1.9 per cent of HP's outstanding shares, but it will, over time, receive an additional 3.7 per cent of HP shares from a trust fund co-chaired by Mr Hewlett. The combined holdings equal 4.6 per cent of HP's total shares, the second largest block of HP shares. The foundation is in the middle of a diversification programme to reduce its HP shareholding. The foundation, which has about 35 per cent of its assets in HP shares, is aiming to reduce that to 10-15 per cent within three to four years. Mr Hewlett's comments suggested the foundation, of which he is chairman, might speed up its diversification plan. The Packard Foundation, with 10.4 per cent, is HP's largest shareholder and joined with the Hewlett Foundation last year in opposing the deal. The two organisations together form the core of a voter block with at least 18 per cent of HP shares aligned against the deal. An adviser to Mr Hewlett said a "yes" vote by shareholders would force the HP heir to reconsider his own stake in the company, which is less than 1 per cent. "It's a purely financial decision. You would have to make an investment decision, the same as any other portfolio manager with a big position in a bad thing." HP said: "The Hewlett Foundation has different investment priorities from most shareholders. It has a short-term diversion focus, so this is not surprising." The outcome of the proxy battle could become clearer next week when Institutional Shareholder Services, the proxy advisory firm, will make a recommendation. Observers have said an ISS recommendation against the merger would all but doom it, while an ISS nod in favour would provide HP with critical momentum leading up to the March 19 shareholder vote. It has been estimated that HP would need the support of two-thirds of institutional shareholders to overcome opposition from the Hewlett and Packard foundations.