US clear the way for HP-Compaq merger

WASHINGTON: Hewlett-Packard Co. cleared the last regulatory hurdle in its

race to acquire rival Compaq Computer Corp. when the US Federal Trade Commission

said on Wednesday the largest merger in computer industry history would not hurt

competition in the sector.

The commission voted 5-0 to approve the $22 billion deal, saying there was no

evidence that the combined firm would crimp competition in the markets for

personal computers, powerful servers, microchips or elsewhere.

The FTC approval, which had been expected, comes a day after an influential

investor advisory firm gave its blessing to the proposal for computer and

printer maker HP to acquire No. 2 personal computer maker Compaq, apparently

shifting momentum behind management in the hotly contested deal.

But Walter Hewlett, a dissident HP board member and son of HP's co-founder

who has assembled a roughly 20 percent bloc of votes in opposition to the

merger, said the FTC vote proved the tie-up would not sharpen HP's competitive

edge.

"We all know that regulators vociferously express concern when there is

even a whiff of competitive advantage in a merger. This obviously did not happen

here with HP's proposed acquisition of Compaq," his spokesman said.

Hewlett says Compaq would bloat HP's business with its personal computer

division, while HP management says Compaq offers services and technology that

would make the combined firm a global powerhouse.

HP and Compaq, already encouraged by Tuesday's recommendation by fund advisor

Institutional Shareholder Services, looked ahead to shareholder votes scheduled

for March 19 and 20. "Completion of the FTC review marks a major milestone

in the approval process, and we are now focused on winning the shareowner

vote," Hewlett-Packard chief executive officer Carly Fiorina said in a

statement.

Fiorina has said the deal is not sealed, and many analysts put even odds on

the merger's approval. The companies should be able to release more details of

their plans, if they choose, now that they have cleared US and European

regulators.

"With the FTC approval it is clear that we are building momentum in the

marketplace," Compaq Chief Executive Michael Capellas said in a separate

statement.

FTC Commissioner Mozelle Thompson in a separate statement went so far as to

endorse the partners' argument that they would be a stronger vendor of high-end

computers using so-called 64-bit chips running the Unix operating system. That

is the main market for corporate and Internet machines.

"The combination -- instead of reducing competition by eliminating a

64-bit chip rival -- may enhance the merged firm's capabilities and ensure a

long-term competitor in the Unix server microprocessor market," Thompson

said.

A spokesman for Walter Hewlett said the silence from rivals like network

computer maker Sun Microsystems Inc., Dell Computer Corp. and HP's main target,

International Business Machines Corp., spoke volumes.

"We believe that HP stockholders should be concerned when competitors

like Sun, Dell and IBM don't object to a transaction that is supposed to add

value to HP," he said,