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

To: hlpinout who wrote (95781)	3/7/2002 6:32:39 AM
From: hlpinout	Respond to of 97611

March 07, 2002 03:12 San Jose Mercury News, Calif., Stocks.comment Column By Scott Herhold, San Jose Mercury News, Calif. Mar. 7--It was the endorsement that Carly Fiorina had to have. When Institutional Shareholder Services recommended Tuesday that its clients approve the HP-Compaq merger, it gave her campaign a much-needed boost two weeks before the vote. That doesn't make it a slam-dunk. Had ISS opposed the deal, it would have been over for Fiorina. Now it's still a contest. Banc of America Securities estimated the odds remain against the deal. Others have put it at 51-49 for it. Long-time readers of this column know that I don't think much of this merger. But having put my prejudice forward, let me step back and analyze Tuesday's news. As an adviser to portfolio managers, ISS wields substantial clout, and counts more than 20 percent of HP's stockholders among its clients. But its recommendation isn't going to change minds already made up. The vast majority of mutual fund managers holding HP already know more about the issues than they care to. "Almost anyone who has a vote is extremely well-informed," says Martin Reynolds, a Gartner Group analyst. "So the ISS is probably not adding so much to the body of knowledge as it might in a less well-known case." It's also important to understand that ISS has historically focused on issues of corporate governance rather than merger strategy. That doesn't mean it lacks a grasp of the bigger picture. It just means that it's more focused on process -- and more amenable to arguments about how well the deal is being done rather than its essential financial wisdom. Having said all that, however, this is still a major boost for Fiorina. In addition to the natural advantages that management enjoys -- an ability to frame the news and control the timing of the vote -- she now has an independent third-party endorsement. That shouldn't be underestimated. Who's likely to be swayed by the ISS? Well, obviously, there's Barclays Global Investors, whose CEO sits on HP's board. With the ISS recommendation, that's 3.1 percent of the vote for Fiorina. Next, the index funds, which make up as much as 9 percent of the vote. And finally, there are portfolio managers who prefer to follow third-party guidance. CBS Marketwatch has put the total following ISS at 18 percent, though I think it will be somewhat less. My favorite way to gauge the handicapping is to look at the arbitrageurs, the professional bettors. In any merger, they define the "spread," that is, the difference between the current price of the stock to be acquired (Compaq) and what it would be worth if the deal goes through. Before the ISS announcement, the spread hovered around 25 percent, a signal of heavy doubt that the merger would take place. In after-hours trading, the spread fell to around 14 percent. At its simplest, that meant more people were buying Compaq, betting that the deal would take place. So Fiorina has a real chance of pulling this off, maybe better than just a chance. So does Walter Hewlett, despite the setback. But there is still this question to be answered: Will victory in this battle have been too costly? Will the epic struggle leave so many wounds that the victor will find governance all but impossible? My guess is that a close vote among the stockholders won't matter much. If they feel strongly enough, dissenters will sell their stock. If Fiorina wins, she will have the confidence that comes from having triumphed after the doubters -- including me -- counted her out. But part of the damage has been the loss of credibility to both sides in this fight. While I think Walter Hewlett has conducted a less vitriolic campaign than HP, the struggle has left no one unscarred. And the victor, whoever it is, shouldn't forget it. -- Scott Herhold's Stocks.comment appears every Monday and Thursday. Write him at the San Jose Mercury News, 750 Ridder Park Drive, San Jose, Calif. 95190; e-mail sherhold@sjmercury.com; phone (408) 920-5877. To read the columns online, see www.siliconvalley.com/mld/siliconvalley/business/columnists/scottherhold/. ----- To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to bayarea.com

To: hlpinout who wrote (95781)	3/7/2002 6:35:29 AM
From: hlpinout	Respond to of 97611

COMPANIES & FINANCE THE AMERICAS: Investors bet on HP-Compaq merger COMPUTERS ARBITRAGEURS SEE A POTENTIAL QUICK PROFIT IF SHAREHOLDERS APPROVE THE DEAL: Financial Times; Mar 7, 2002 By SCOTT MORRISON and PETER THAL LARSEN Investors yesterday bet that Hewlett-Packard's chances of clinching its bid for Compaq Computer had increased sharply following the favourable recommendation by Institutional Shareholder Services, the proxy advisory group. By early afternoon the difference between Compaq's share price and the implied value of Hewlett-Packard's all-share offer had narrowed to less than Dollars 2, a discount of about 15 per cent. When Walter Hewlett, the dissident HP director, first launched his campaign last year the spread almost reached 40 per cent. Arbitrageurs, who specialise in the trading of shares of companies involved in takeovers, have been sceptical of its chances of success ever since the proposed Dollars 22bn merger was announced last September. But following ISS's move, they have been thinking again. With less than two weeks to go until the crucial vote by HP shareholders, arbitrageurs see a potential quick profit if the merger is approved. Typically, mergers which are expected to be approved trade on much narrower spreads. "The spread is telling you there's a 55 per cent chance that the deal will go through," said Andrew Whittaker, head of risk arbitrage research at Lehman Brothers. "Everybody is looking at this," Mr Whittaker added. Given the lack of recent takeover activity, some investors are wondering whether they can afford to miss out on what could be one of the year's most lucrative trades. The slump in M&A activity has left many specialised merger arbitrageurs with a shortage of investment opportunities. For the few mergers that have been announced, the spreads are often too narrow to compensate investors for the risk that they will fail. However, it is almost impossible to predict the outcome. HP has said that about 23 per cent of its shareholder base are clients of ISS, although many institutions have said they will not necessarily follow its advice. ISS is seen to have the most influence on index funds which account for about 9 per cent of HP shares. Many of HP's largest shareholders have said they will take the ISS report into consideration, but will make their own decisions on the merger. "Unless you are able to get into the top 20 institutional shareholders to find out how they are going to vote, you cannot handicap it," says one investor. Another hurdle is that arbitrageurs are not in a position to influence the outcome of the vote. In hostile takeover situations, they will often own a large chunk of the target's shares, providing valuable support for a deal. HP will not have this support, as arbs who are betting the deal is going to succeed will probably be selling HP shares short. What is more, before putting on their trades arbs also have to calculate the downside risk if they are proved wrong. Analysts believe Compaq shares will fall Dollars 1-Dollars 2 if HP shareholders block the deal. Copyright: The Financial Times Limited 1995-2002

To: hlpinout who wrote (95781)	3/7/2002 6:46:26 AM
From: hlpinout	Respond to of 97611

Palm Computers Market Boasts High Potential -------------------------------------------------------------------------------- Story Filed: Wednesday, March 06, 2002 10:39 AM EST CHINA, Mar 06, 2002 (AsiaPort via COMTEX) -- From "notion war" to "price war", domestic palm computers manufacturers have been trying their best to attract consumers. However, since the beginning of 2002, the notion of PDA has been put into "low-end PDA" with simple things recording function, and PDA has been deemed as the palm computers with real PC functions, such as Internet accessing, MP3, as well as Word and Excel processing. According to a survey, in the future consumption of PDA products, 48.1% of the surveyed intend to buy palm computers, and 39.9% to purchase mobile communication products, signaling high-end palm computers will become the leading products in 2002's market, and the middle and low-end products will be transferred into subordinative ones. Domestic palm computers operation system used to take much of the market shares in home market. However, with Microsoft unveiled the notion of "PocketPC", the powerful software "emperor" again became the constitutor of the game rules. From HP and Compaq abroad to Legend at home, a number of manufacturers have been successively adopting Microsoft's WinCE operation system, and the high-end palm computers represented by "PocketPC" will be further taking some leading positions in the home market. In addition, according to a report from the Gartner Co. which specializes in the research of palm computers, the sales volume of palm computers in the global market in 2001 reached 13.10 million sets, up 18% over the previous year, heralding the tremendous market potential of palm computers. From GD-HK Information Daily, Page 12, Monday, March 04, 2002 info@AsiaPort.Com Copyright (C) 2002 Alestron, All rights reserved

To: hlpinout who wrote (95781)	3/7/2002 6:49:49 AM
From: hlpinout	Read Replies (1) \| Respond to of 97611

Compaq Refutes Analyst's Questions About Its Data, WSJ Says By Edvard Pettersson Houston, March 6 (Bloomberg) -- Compaq Computer Corp. refuted questions UBS Warburg analyst Don Young had raised about how it accounts for sales incentives to dealers, the Wall Street Journal reported, citing company officials. Young misread the impact of the company's adoption of new accounting standards, Compaq's Chief Financial Officer Jeff Clarke told the paper. Young had argued that the computer maker's adoption of a rule that details how a company should match expenses to revenue may have given it a $156 million boost to its 2001 results, the paper reported. At issue is the way Compaq accounted for incentives to dealers that in the past were not necessarily booked in the same quarter that the sales were booked, the Journal said. Young was disturbed by the size of a reserve Compaq for the accounting change because it could have provided an opportunity to shift expenses around and manage earnings, the paper reported. Compaq denied that the reserve provided a hidden boost to earnings, the paper said, citing Clarke. Other Wall Street analysts have criticized Young's analysis as ``unfair,'' the Journal said, citing Salomon Smith Barney analyst Richard Gardner Jr. (WSJ 3-7)