HP takes off gloves, attacks Hewlett on Compaq

Peter Henderson

SAN FRANCISCO: Hewlett-Packard Co. on Friday launched its most scathing

attack yet on dissident director Walter Hewlett and his opposition to the Compaq

Computer Corp. merger, calling him a "man who has no plan" for the

future of the company.

With less than a month until shareholders vote on the $21 billion merger and

the outcome far from clear, HP board members said Hewlett's proposals announced

this week amounted to a cobbled together, "now you see it, now you

don't" strategy.

The opponents traded accusations back-and-forth in a volley of statements

through the business day on Friday.

In its opening salvo, a letter to shareholders, HP said "You may have

read that Walter Hewlett has a 'plan' for HP. Or perhaps you read that he does

not have a plan. Maybe you read both, depending upon which day of the week it

was, or what Walter Hewlett thought was expedient to say at the time..."

HP continued on Friday: "So when Walter Hewlett tells you he has no plan

and then says he really has one, and then vehemently denies he has a plan and

then says he has a new plan -- all in a matter of two weeks -- only one thing is

entirely clear: this is a man who has no plan for the future of your company or

your investments in HP shares."

Hewlett said this week his alternative to the merger was a "focus and

execute" strategy aimed at expanding HP's printing and high-end services

division. However, he has been inconsistent in the terms he has used to describe

that vision, telling Reuters he had a strategy, not a plan, then in a later

statement referring to the "details of the plan."

'Unseemly campaign'



Hewlett responded with a brief statement defending his calculations that HP
would be worth $14 to $17 per share more without Compaq. "HP continues its

unseemly campaign to attack me rather than attempt to support the merits, or

lack thereof, of its proposed merger with Compaq," he said.

HP then shot back a release saying, "We don't understand how Walter

Hewlett could make such baseless claims." Hewlett closed the day with his

rebuttal, that investors would see through HP's "smokescreen".

Hewlett has been arguing against the merger in letters to shareholders and

newspaper ads, while Hewlett-Packard management has launched an equally

aggressive campaign of its own aimed at garnering support ahead of the March 19

shareholder vote on the Compaq merger.

Hewlett and his team have a $32 million war chest to oppose the merger and

have been taking out frequent ads in national newspapers. HP has advertised even

more often frequently.

Hewlett's ally, David Packard -- the two are sons of HP's legendary founders

-- cast suspicion on HP's claims of strong support in the ranks on Wednesday,

when he issued the results of a poll of HP employees in Corvallis, Oregon, in

which nearly two-thirds opposed the deal.

A December HP survey of approximately the same employees had shown about

three-quarters backed the deal. Hewlett has tried to keep the fight focused on

whether to approve the merger, while management has argued that investors needed

to be presented with a clear and preferable alternative in order to vote against

the deal.

Both sides have taken to referring to the other in condescending terms, while

calling for fewer personal attacks and deploring the soap opera in the business

press.

HP chief executive Carly Fiorina, who engineered the merger, has called

Hewlett's opposition to the deal "irresponsible." For his part,

Hewlett has made clear that if the deal is scrapped, Fiorina should be fired.