Hewlett steps from limelight, backs merger

Kevin Krolicki

LOS ANGELES: It may be time for Walter Hewlett to leave the snake pit of

corporate politics and become "invisible" again.

After a bruising six-month battle, Hewlett threw in the towel on Tuesday,

giving up his fight to stop the company his father co-founded, Hewlett-Packard

Co., from buying Compaq Computer Corp -- a merger he had earlier blasted as an

$18 billion mistake.

He conceded defeat in a five paragraph statement just hours after a Delaware

court cleared the way for HP's purchase of No. 2 personal computer maker Compaq

by rejecting Hewlett's claims that management had lied to shareholders and

coerced a key investor into voting its way.

In his statement, Hewlett said, "After reviewing the Court's opinion, we

have decided not to appeal the decision to the Supreme Court of Delaware.

Additionally we have decided to .... permit the (merger) vote to be

certified." And Hewlett added that even though he had strongly opposed

buying Compaq he would work to make the merger succeed in the interest of HP

stockholders.

Hewlett, who had become something of a folk hero to those opposed the merger,

urged his supporters -- many in HP and Compaq -- to support the deal that he

once predicted would saddle HP with a massive, money-losing personal computer

business.

Because of his lawsuit, Hewlett last week lost his seat on the HP board with

fellow board members saying he had moved from dissident to antagonist. When he

was first appointed to the board 15 years ago, Hewlett told the San Jose Mercury

News in an interview that his role was "to be invisible."

It may be a role he may return to, although in an earlier statement following

the court decision he vowed to "continue to monitor the company's

performance to ensure that it acts in the best interests of all

stockholders."

From ivory tower to the 'snake pit'



For someone dismissed by detractors as a dabbling dilettante, Hewlett, an
academic and musician by training, proved to be a gritty and determined opponent

of the company's plans to buy Compaq.

In the course of the proxy fight that pitted Hewlett against HP chief

executive Carly Fiorina and borrowed its smackdown style from political

campaigns, the 57-year-old director was relentless in arguing that buying Compaq

would amount to a $18 billion mistake for the company his father co-founded.

A marathon runner, and known for leading a team of HP workers annually on a

grueling 139-mile bicycle competition over high Sierra peaks, Hewlett emerged

from relative obscurity to become the leading opponent of what would be the

computer industry's largest-ever acquisition.

He challenged a preliminary tally of shareholder votes showing the merger had

been approved by a narrow margin of 45 million shares of some 1.7 billion cast,

a process that sent representatives of both sides back in a challenge process

known as the "snake pit."

Then he filed suit looking to overturn the vote and alleging HP bought or

coerced Deutsche Bank Asset Management to back the merger and that HP management

lied to shareholders by covering up information that merger planning was behind

schedule.

Delaware Chancery Court Judge William Chandler rejected both of those charges

and made a point of vindicating the credibility of Fiorina, who emerged as

Hewlett's nemesis in the course of his long fight against the merger.

"Members of HP's senior management testified credibly, in accordance with

the evidence and without exception," Chandler wrote in Tuesday's decision.

Hewlett had become a hero to merger opponents, including disaffected workers

at HP and Compaq because the merger plan orchestrated by Fiorina called for some

15,000 workers -- about 10 percent of the new company -- to lose their jobs.

Hewlett, who lives in Palo Alto, California in a home not far from the

now-legendary garage where his father, Bill Hewlett and his partner David

Packard founded HP, had set aside $32 million of foundation money for the proxy

fight.

That underwrote a campaign against the merger carried out in the Hewlett

style --- with press releases long on details about why he believed the

acquisition did not make sense -- that marked a contrast to HP's slicker ads

touting the deal.

Hewlett argued the merger would turn HP into the No. 1 seller of low-margin

personal computers rather than enhance its high-end computing and printer

businesses, and that HP would lose ground against rivals while trying to

integrate 150,000 employees.

Fiorina, who tied her own fate to the deal, countered that the merger would

create a global computer powerhouse with the scope to offer full services for

corporate customers.

(Additional reporting by Peter Henderson)