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

To: hlpinout who wrote (95562)	2/28/2002 6:19:34 PM
From: hlpinout	Respond to of 97611

HP Shows Wall Street Testimonials to Proposed Compaq Merger Shelley Emling c.2002 Cox News Service In a last-ditch pitch to Wall Street, Hewlett-Packard Co. chief Carly Fiorina deployed a parade of business bigwigs Wednesday to tout her company's proposed merger with Compaq Computer Corp. Before dozens of analysts, she played a videotape of pro-merger testimonials from several well-known names, including DreamWorks co-founder Jeffrey Katzenberg, AOL Time Warner Inc. chairman Stephen Case, and New York Stock Exchange chief Richard Grasso. The message from all: bigger is better. ``This deal makes a lot of sense to our company,'' said Citigroup chairman Sanford Weill in one taped testimonial, adding that a company's scale ``really is important.'' Wednesday's daylong plea to the investment community to support the controversial merger came just weeks before a shareholder vote on March 19 will provide the nail-biting climax to an increasingly heated battle to merge two technology giants. Since the merger was announced in September, Walter Hewlett, son of one of the company's founders, has emerged as its most-vocal opponent. For months, he has argued the deal would make the company too dependent on selling low-profit personal computers. David Packard, son of the other founder, also has pledged to fight the merger. Indeed the entire family and the boards that run their trusts have vowed to vote the 18 percent of shares they own against the merger. On top of this opposition, several institutional investors with significant blocks of HP stock have said they will oppose the merger. The latest came Tuesday from Brandes Investment Partners, which as of December owned 1.3 percent of the shares. And so, Fiorina and other top executives insisted again and again Wednesday that the California company's $21.7 billion purchase of Houston-based Compaq would create new opportunities for the global provider of computing and imaging services. ``All of our businesses are not where they need to be,'' said Hewlett-Packard's chief financial officer Bob Wayman. He said the company's pro forma earnings per share in 2003 could be $1.51 with Compaq - or $1.35 without it. Duane Zitzner, president of HP computing systems, said the merger would give Hewlett-Packard a ``stellar'' line of products that would rival anything in the marketplace. ``Following the merger, we will become the top people in Unix, Linux and in Windows,'' he said. Although Fiorina and the others emphasized the merger's financial up sides, they also railed against the heirs, saying they were trying to mislead investors with a string of deceptions. Hewlett charged Tuesday that Fiorina and her counterpart at Compaq, Michael Capellas, would gain $117.4 million in bonuses and pay raises over two years if the merger's goes through. He also filed a 48-page report Wednesday with the Securities and Exchange Commission charging that the company was paying too much for Compaq. Fiorina called Hewlett's compensation-related charges ``one of his most egregious attempts yet at distraction.'' ``How can we disclose what has not yet been decided?'' she asked, referring to compensation plans. Fiorina also tried to counter Hewlett's charges that employees were overwhelmingly against the merger by emphasizing that her company's management team was well acquainted with its 86,000 employees and that by and large, employees were enthusiastic about the company's merger plans. Ann Livermore, president of HP services, said she oversees 30,000 employees and that she's been face to face with about 80 percent of them in recent months. ``They are very excited about the merger,'' she said. But according to a poll sponsored by Packard, nearly two-thirds of employees at a company plant in Boise, Idaho are against the merger. A poll at a plant in Corvallis, Ore., reaped similar results. And analysts said Wednesday that employee opposition is a major reason why the merger may not go through. ``This merger would be doubtful if even 10 percent of employees were opposing it,'' said Rob Enderle, an analyst with Giga Information Group. ``A merger of this magnitude needs all employees focused on making it successful.'' He said the company's own surveys have shown that 30 percent of employees oppose the merger, mostly because of the magnitude of potential layoffs. Enderle said that although Wednesday's presentation was a strong effort to win Wall Street's support, it might not be enough to bring about the merger. ``The business environment has certainly changed a lot since this merger was announced,'' he said. ``The Enron scandal has created far too much risk for a lot of institutional investors.'' Other analysts, including Andrew Neff with Bear Stearns, said the shareholder vote still seemed ``too close to call,'' although he added that shareholders tend to go along with the wishes of management. Hewlett-Packard reported earlier this month a tripling of its first-quarter earnings from the same quarter a year ago. For the quarter ended Jan. 31, the company reported net income of $484 million compared with $141 million during the same quarter last year. But the strong showing has only heated up the merger debate. Fiorina has argued that the solid results prove the company's operations aren't being negatively affected by Compaq-related distractions. But Hewlett said in a statement that the results further ``confirmed that Hewlett-Packard does not need to acquire Compaq.'' ----- (The Cox web site is at coxnews.com)