WILMINGTON, Del., Apr 25, 2002 (AP Online via COMTEX) -- Hewlett-Packard Co. chief Carly Fiorina was called back to the witness stand Thursday to explain why she told a big investor its vote on the proposed acquisition of Compaq Computer Corp. was "of great importance to our ongoing relationship."
The comment was made in a last-minute presentation Fiorina and HP chief financial officer Bob Wayman made to Deutsche Bank investment managers just before the March 19 shareholder vote began.
Fiorina, called back to testify on the third and final day of a trial challenging the merger, defended the remark, saying it was a common way to speak to an investment bank, particularly Deutsche Bank, which buys computer equipment from HP as well as provides some financial services.
Dissident HP director Walter Hewlett is suing to stop the $19 billion deal, claiming that HP improperly coerced Deutsche Bank's investment division to vote for the deal and that HP misled investors about whether the Compaq deal could meet its touted financial goals.
Stephen Neal, a lawyer for Hewlett, also quoted from internal message traffic between Deutsche Bank officials. One message from Dean Barr, chief investment for Deutsche Bank Asset Management in New York, said to the bank's proxy team that controlled the vote on the shares, "This is extremely sensitive. ... I'm not trying to put pressure on you," but be sure you can find a way to back up your decision on this.
An e-mail from a German representative to Barr the day before the vote said, "I don't want to be smarter than the people in New York; if it's better for our customer for us to change our vote, then let me see what I can overcome."
In testimony Wednesday in Delaware Chancery Court, Hewlett contradicted a claim made by Fiorina and Wayman. Each executive testified that internal projections showed the merger falling short of HP's revenue and earnings targets largely because the business units that contributed to the estimates offered lower projections than they knew they could hit. Fiorina called the process "sandbagging."
However, Hewlett said HP business units typically tend to be too optimistic and aggressive about what they can deliver.
"It was the responsibility of the board to give them a haircut," said Hewlett, whose 15-year tenure on the HP board ends Friday. HP management and his fellow directors decided not to renominate him after he filed this lawsuit.
Hewlett's testimony Wednesday was a somewhat anticlimactic coda to the hard-fought proxy campaign he waged against HP management over the Compaq deal.
Hewlett said he carefully considered the effect his lawsuit would have on HP, but said he only sought the truth about what happened.
HP lawyer Steven Schatz suggested Hewlett, who was derided as a "musician and academic" during the merger campaign, was manipulated by advisers who stood to make $12 million if the deal got rejected.
Hewlett sued HP in Delaware Chancery Court, which can oversee the governance of companies incorporated in Delaware, in hopes that a judge will overturn the March 19 shareholder vote on the deal.
A preliminary tally released last week found that 51.4 percent of HP shares were voted for acquiring Compaq, with 48.6 percent against. That amounts to a lead of 45 million shares.
In trading Thursday on the New York Stock Exchange, shares of Palo Alto, Calif.-based HP fell 15 cents to $17.06. Shares of Houston-based Compaq fell 16 cents to $10.20.
Hewlett's testimony was far less contentious than Fiorina's seven hours on the stand Tuesday and Wednesday. She denied doing anything improper, and said the documents showing gaps between HP's internal financial projections and its public forecasts were taken out of context.
She got angry with Neal, who repeatedly pressed her to concede that the internal numbers were meaningful.
"Sir, you are accusing the CEO of a publicly traded company of lying," she said, glaring at Neal.
Neal asked Wayman about how Deutsche Asset Management, which had been opposed to the deal, switched 17 million shares for the merger on the day of the vote.
Wayman said he and Fiorina never made a formal pitch to Deutsche Asset Management because they assumed the firm would vote for the deal. After all, he said, a Deutsche Bank analyst supported the acquisition, and Deutsche Bank was giving HP "market intelligence" during the proxy fight for a $1 million fee, with a $1 million bonus if the deal won approval.
Wayman added that a few days before the shareholder vote, Deutsche Bank vice chairman Benjamin Griswold told him the investment side of the company was going to approve the deal.
But then two days before the vote, HP's proxy solicitor informed Fiorina that Deutsche Asset Management actually was going to vote no.
Wayman said he called Griswold, who was apologetic and embarrassed, and arranged a conference call an hour before the shareholder vote so Wayman and Fiorina could make a last-minute pitch to Deutsche proxy teams.
Less than two hours later, Wayman said, he was told Deutsche Asset Management would support the deal after all.
Wayman conceded that he can decide whether HP gives future business to Deutsche Bank. But he denied playing that card.
"I've had a long and successful career," Wayman said. "I don't threaten, I don't coerce, I don't entice, I don't mislead."
Deutsche Asset Management has said it acted in the best interests of its investment clients.
---
On the Net:
hp.com
compaq.com
Opposition site: votenohpcompaq.com
By BRIAN BERGSTEIN AP Business Writer
Copyright 2002 Associated Press, All rights reserved |
