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

To: Elwood P. Dowd who wrote (97323)	4/23/2002 5:41:06 PM
From: Night Writer	Respond to of 97611

Hewlett Attorneys Claim Deal Deception WILMINGTON, Del., Apr 23, 2002 (AP Online via COMTEX) -- Lawyers for dissident Hewlett-Packard Co. shareholder Walter Hewlett cited internal company memos and personal documents in court Tuesday as evidence that executives deceived investors about the financial prospects of HP's proposed $19 billion purchase of rival Compaq Computer Corp. In opening statements in Hewlett's attempt to overturn a shareholder vote approving the deal, Hewlett lawyer Stephen Neal claimed HP executives knew as late as a few days before shareholders were set to vote on the deal last month that internal projections showed the financial benefits would fall well short of what HP publicly touted. A personal journal entry Compaq CEO Michael Capellas made in late February or early March was headed "sobering thought" and said "at our course and speed we will fail." At the same time, a select group of HP and Compaq executives held regular meetings on the merger's progression and consulted a chart that showed the widening gap between current projected financial benefits of the merger and what was promised when the merger was initially proposed to shareholders in an SEC filing. The series of charts was presented to the judge Tuesday, but was kept from view of the courtroom to protect company secrets. Neal also presented an e-mail from a member of HP chief financial officer Bob Wayman's staff who had conducted one internal study on the financials. The message to Wayman said "The attached is a frightening reality check. ... I see little realistic upside and I am not alone. I sincerely hope we all start acknowledging the realities soon." Neal said HP's internal projections showed the deal would likely reduce the combined company's earnings per share by as much as 25 percent rather than boost them, at least in the near term. He also suggested that HP suddenly found a way to make the numbers work once the judge ruled to let Hewlett's suit go to trial. HP chairwoman and chief executive Carly Fiorina took the stand first, insisting that the company's original projections were based on the best estimates at the time and that it was known that they were subject to change. Speaking in a voice so soft, she was asked to speak up several times, Fiorina testified that she did not disclose the updated projections to shareholders because "it would be irresponsible to do so." Fiorina testified for 90 minutes before the lunch break. Her testimony was to continue when court resumed. The official certification of HP's shareholder vote on the deal, first announced seven months ago, is expected within days, but Hewlett is asking a Delaware Chancery Court judge to invalidate those results. Hewlett first fought the deal in a public relations battle with HP on the grounds that buying Compaq was too risky and would bog HP down in the weak personal-computer market at the expense of its profitable printing division. In his lawsuit, he contends HP won its slim majority in the March 19 shareholder vote by threatening to take business away from at least one big investor, Deutsche Bank, in addition to hiding unflattering information about HP and Compaq's ability to carry out the merger. Neal claimed Deutsche Bank was promised $1 million bonus if deal was approved. That payment was approved by HP chief financial officer Bob Wayman without Fiorina's knowledge, Neal told the court. Fiorina personally thanked head of Deutsche Bank for "going to bat for us" with the bank's proxy committee, Neal said, citing a voice-mail, which Fiorina ended by saying, "I look forward to doing business with you" in the future. Hewlett-Packard has denied wrongdoing, and Deutsche Asset Management has said it merely voted the shares it controlled in the best interests of its investment clients. HP attorney Steven Schatz said the signoff was typical for any conversation with an investment bank and said there are other memos showing the merger plan was ahead of schedule. "The shareholders vote should be honored," Schatz said. "Management integrity has been impugned on the flimsiest of bases." In a scene normally reserved for popular sporting events and concerts, about 100 people - mostly attorneys, investors and journalists - lined up outside the courthouse. Some had paid others to stand in line overnight to ensure they would get inside the courtroom. "This is a such high profile case, everybody's afraid they're not going to get a seat for the trial," said Rob Campbell, 27, an employee at a local courier service who was paid $20 an hour by a law firm to line up outside the courthouse at 3 a.m. The trial, being heard by one of the court's expert business judges and not a jury, is expected to last three days. The Delaware Chancery Court in Wilmington, which has jurisdiction over the governance of companies that are incorporated in the state, including HP. A preliminary tally released last week by an independent proxy certifying firm found that 51.4 percent of HP shares were voted for the Compaq deal, and 48.6 percent came out against. With more than 1.6 billion shares voted, HP beat Hewlett by 45 million shares - a margin of less than 3 percent. Hewlett hopes Chancellor William Chandler III negates the vote either by voiding certain investors' shares or by determining that HP corrupted the entire process by buying votes. Hewlett believes Deutsche Asset Management originally voted 25 million HP shares against the deal but switched 17 million just before the shareholder meeting, which came days after Deutsche Bank helped arrange a $4 billion credit facility for HP. In trading Tuesday on the New York Stock Exchange, shares of Palo Alto, Calif.-based HP fell 35 cents to $17.92. Shares of Houston-based Compaq lost 73 cents, 6.8 percent, to $10. --- On the Net: hp.com compaq.com Opposition site: votenohpcompaq.com By BRIAN BERGSTEIN AP Business Writer Copyright 2002 Associated Press, All rights reserved

To: Elwood P. Dowd who wrote (97323)	4/23/2002 5:43:42 PM
From: Night Writer	Read Replies (1) \| Respond to of 97611

eutsche Bank was adviser to H-P in Compaq vote WILMINGTON, Del., April 23 (Reuters) - Deutsche Bank AG's 11th-hour decision to back Hewlett-Packard Co.'s <HWP.N> takeover of Compaq Computer Corp. <CPQ.N> stemmed from its previously undisclosed investment banking relationship with H-P, a lawyer contesting the merger said on Tuesday. In Delaware business court, top executives of the computer and printer maker, including Chairman and Chief Executive Carly Fiorina, gathered to face off against Walter Hewlett, a dissident board member and son of the company founder, who has fought the merger in a proxy battle. H-P says it won that proxy fight by a narrow margin. But Walter Hewlett's lawsuit accuses the company of both vote buying and failure to disclose the financial implications of the deal. He seeks to have the vote overturned, and experts say that the key to him reversing the move to buy Compaq may rest with the disclosure issue more than the vote-buying allegations. The trial seemed to inject a new sense of unease into the market. In mid-afternoon trading, the deal's spread -- or the difference between where the deal values Compaq shares and where the market currently values them -- widened to about 12 percent. The deal's spread had narrowed significantly after Hewlett-Packard announced last week that it won shareholder approval by a three percent margin. Deal spreads in the five to 10 percent range are generally considered "safe" by merger arbitragers. The Securities and Exchange Commission and federal prosecutors are also investigating issues surrounding the shareholder vote. LAWYERS LINE UP A lawyer for Walter Hewlett, Stephen Neal, of Cooley, Godward LLP, said H-P's Chief Financial Officer Bob Wayman agreed to allow two Deutsche Bank employees to act as proxy solicitors in the merger. As part of the agreement, Neal alleged, Deutsche Bank <DBKGn.DE> would be paid a $1 million bonus if the deal went through. "The evidence is going to show that sometime around the signing ... the top executives of H-P believed that Deutsche Bank was going to support the merger, and indeed they assumed that a company entering into a contract would in fact vote their shares in support of the merger," Neal said. Neal said that on the day of the shareholder vote, March 19, H-P executives held a conference call with Deutsche Bank's proxy solicitors and its asset management team to try to sway Deutsche Bank's vote. Walter Hewlett was also allowed to talk to Deutsche Bank on that call, both sides said. Deutsche Bank said in a statement on Tuesday it had been retained by Hewlett-Packard in January 2002, four months after the deal was announced, in a secondary role as a merger adviser. "Deutsche Asset Management's proxy committee did not consider and was not influenced by any banking relationships with Hewlett-Packard," the bank said in a statement. In the current downturn in merger activity, it's not unusual for companies to hire secondary advisers, often splitting up the business between different investment banks. However, Deutsche Bank's advisory relationship was never disclosed in Security and Exchange Commission filings and never appeared in market research firm Thomson Financial's quarterly merger adviser rankings. Lawyers for Hewlett-Packard contended they had not acted improperly and said the evidence would show that. Walter Hewlett has alleged Deutsche Bank switched its vote because it was promised future investment banking business. Neal said after Deutsche Bank changed its vote, Fiorina called one of the proxy solicitors thanking him and saying that she looked forward to doing business with him. Hewlett-Packard attorney Steven Schatz said he would show the company had done nothing wrong. Regarding the voicemail and Fiorina's looking forward to doing business, he said: "That's the way you end every conversation with every investment banker." Walter Hewlett's lawyers spent most of Tuesday's opening arguments on the disclosure issue, citing internal HP and Compaq communications to argue executives allegedly knew they were not on track to meet stated financial targets once the company was merged. Those financial targets included revenues, earnings, and cost savings from the deal. ((-- New York Newsdesk, 646 223-6000)) REUTERS * end of story *

To: Elwood P. Dowd who wrote (97323)	4/23/2002 6:04:14 PM
From: Night Writer	Read Replies (3) \| Respond to of 97611

El, This doesn't look good to me. If the merger team numbers were looking bad prior to the merger, why keep pushing the merger? Senior manager commitment to the merger? Senior management is suppose to look out for shareholders and they are suppose to be honest with shareholders. Not disclosing the number problem stinks. Focusing on email Vs voice mail was a red herring to avoid saying anything about the numbers. The merger had a ripe smell from the start, and it is getting worse. NW