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Technology Stocks : Hewlett-Packard (HPQ) -- Ignore unavailable to you. Want to Upgrade?

To: PCSS who wrote (522)	5/20/2002 11:13:51 PM
From: PCSS	Read Replies (1) \| Respond to of 4345

PART 3 OF 5 Ms Fiorina, who had earned her stripes as Lucent Technologies' saleswoman extraordinaire, was well aware of the challenge. She had hired integration experts, and pointed to Compaq's successful efforts to integrate its troubled Tandem and Digital acquisitions. In addition, the two companies had formed integration teams, ultimately involving more than 1,000 staff, who spent an estimated 1.3m man-hours planning in minute detail. These plans, made far in advance, eventually helped convince the majority of institutional shareholders to support the transaction. Ms Fiorina's continuing efforts to sell the deal appeared slowly to be turning the tide. By early November, the difference between Compaq's share price and the value of HP's offer had narrowed significantly, indicating that investors had begun to believe the deal could go through. HP's management and advisers were becoming more confident. It was a confidence that was misplaced. On the night of November 6, Mr Capellas was in Paris dining with clients when his cell phone rang. He was told Ms Fiorina needed to speak to him and knew immediately there was a problem. Mr Capellas made his excuses and stepped onto the Parisian street to call her. A bombshell had dropped. Walter Hewlett, a board member and son of Bill Hewlett, the company's co-founder, was opposing the deal. HP's shares soared 17 per cent, on hopes that the deal was doomed. Ms Fiorina had, crucially, failed to sell her vision to a man who was not only a board member but her second most important shareholder, controlling through family foundations more than 5.5 per cent of the stock. This failure allowed opposition to crystallise around a powerful and symbolic figure. Mr Hewlett had expressed reservations from the start, although it is not certain how forcefully he made his objections known to the HP board. He argued that he made his views very clear and that he reserved the right to vote his shares as he saw fit, despite initially voting in favour as a director. HP pointed out that he missed three crucial board meetings. It also claimed he did not at that time raise the strategic and financial issues upon which he later based his proxy battle. Ms Fiorina defended her reading of Mr Hewlett's intentions. She told the Financial Times in December: 'There is a large difference between voting those shares and engaging in a public fight against a deal he voted for and engaging in the process actively and aggressively with shareholders and the media.' Others viewed her misjudgment less charitably. One institutional investor said Ms Fiorina had at best made a 'sloppy' mistake by failing to ensure that Mr Hewlett was committed to the deal. She was told of his decision just 30 minutes before he made his opposition public. The company appeared to fumble for a response, concerned about alienating three sisters from the Packard family whose foundation controlled more than 10 per cent of the company and whose support was critical. Behind the scenes, HP's management was 'in the trenches' trying to ensure large shareholders did not come out against the deal, according to one adviser. It is unclear how often Ms Fiorina and Bob Wayman, HP chief financial officer, met the Packard Foundation in late November, but it is known they walked out of one meeting in early December confident they had managed to sway the Packard board.