Walter Hewlett Explains Stance
Dissident Hewlett-Packard Co. director Walter Hewlett said he had met with more than 30 of the company’s 50 largest investors and found widespread opposition to HP’s planned acquisition of Compaq Computer Corp.
“The clear impression I have is that the people we talk to don’t like the merger,” said Hewlett, who is trying to muster enough shareholder votes to kill the $25-billion all-stock deal. “We were uniformly well-received.”
In his first round of on-the-record interviews since declaring his opposition to the biggest technology merger in history, the 57-year-old philanthropist disputed several of HP’s claims in the ongoing battle for shareholder votes.
For example, he challenged HP director George Keyworth’s assertion last week that Hewlett had refused to engage in substantive conversations with the board about his opposition to the Compaq takeover.
“The board knew all along that I had grave reservations, and I expressed them at each point when all of this was discussed,” said Hewlett, whose father co-founded the Palo Alto computer and printer maker. “All of this is a smoke screen.”
Asked about HP’s contention that he had never worked at HP, Hewlett confirmed that in addition to serving on the board since 1987, he had worked full time at the company for three summers.
“It is incorrect,” he said of HP’s statement. Hewlett said he hadn’t asked HP to correct the record because the debate on his background is a “diversion” from the issue of whether the merger is good or bad for HP investors. “I really understand HP and the business it’s in,” Hewlett said.
On the underlying dispute, he reiterated that major technology mergers routinely fall short of management projections. Recent securities filings by Hewlett cite the sliding profit at Houston-based Compaq after it swallowed Digital Equipment Corp. and Tandem Computers.
“HP can do much better on its own,” Hewlett said. “The net present value of HP stock is going to go down $5,” he said, even if everything goes right after the merger.
HP spokeswoman Rebecca Robboy offered modest disagreement. “We have a different view of the facts,” she said. “We’ve been meeting with investors. We have a very good sense of their level of support.”
Hewlett’s family foundation has about half its endowment tied up in more than 100 million HP shares, worth more than $2.2 billion based on Thursday’s close of $22.11 a share.
But he said the charity was not necessarily more risk-averse than the average investor, as HP has suggested.
HP Chief Executive Carly Fiorina and the company’s other directors say the union with Compaq would save billions of dollars through the elimination of competing product lines, give HP critical mass in the services business and better enable the company to compete against IBM Corp. in the market for big server computers.
Hewlett and many Wall Street analysts disagree, saying that the company would lose some customers as it tries to force them toward the surviving lines of machines.
And they say HP’s profitable printing business would be weighed down by Compaq’s exposure to the difficult personal-computer market.
Challenged by HP to spell out a competing plan for HP to increase earnings, Hewlett said he favored smaller, more targeted acquisitions as a starting point. “Plenty of alternatives exist,” he said. “The board should direct the management to explore them.”
In other HP-Compaq news Thursday:
* The European Commission gave unconditional antitrust approval to the deal, removing a barrier to completing the transaction, which analysts said gives a boost to Fiorina’s effort to overcome opposition led by Hewlett.
* HP cut total compensation for top executives last fiscal year. Fiorina earned $1 million in salary with no bonus in fiscal 2001, down from salary and bonus totaling $2.77 million in 2000. Fiorina also was granted $1.17 million in options and other compensation, down from $2.07 million in such awards in 2000.
* Compaq cut total compensation for top executives last year as the computer maker’s turnaround stalled. CEO Michael D. Capellas earned $1.6 million in salary with no bonus in 2001, down from salary and bonus totaling $5.04 million in 2000. Capellas also was granted $2.1 million in loan forgiveness and other compensation but no restricted stock awards, contrasted with $24.4 million in such awards last year.
