Carly’s dream comes true

Peter Henderson and Duncan Martell

CUPERTINO: Hewlett-Packard Co. chief executive Carly Fiorina on Tuesday

claimed shareholders had narrowly approved her $20 billion plan to buy Compaq

Computer Corp., but dissident board member Walter Hewlett refused to concede

defeat.

Fiorina immediately moved to quash fears that a tortured count similar to the

2000 election poll in Florida would engulf the HP ballot and said the companies

would move ahead full steam with integration planning, including 15,000 layoffs.

Shareholders briefly booed a tired-looking Fiorina during the special meeting

to decide whether to carry out the biggest merger in computer industry history

at HP, one of Silicon Valley's first start-ups which began in a garage 63 years

ago.

But the iron-willed chief brought in three years ago to shake up the ailing

company declared victory immediately after the meeting, calling the margin of

victory "slim but sufficient."

Back to academia for Hewlett



Fiorina aims in one stroke to nearly double revenues to more than $80
billion, expand and deepen the entire line of PCs, printers and large computers,

and take on current No. 1 computer maker International Business Machines Corp.

The shareholder meeting, convened in a Silicon Valley concert hall, gave a

warmer welcome to dissident director Walter Hewlett, son of co-founder Bill

Hewlett, who afterward said the count was "razor thin" and too close

to call. A source in his camp put the pro-merger margin at less than 0.5

percent.

That would be about 8.5 million of roughly 1.7 billion shares HP says voted.

"We disagree with his numbers," an HP spokeswoman said.

Hewlett, who led a spirited four-month campaign against the deal, argues the

acquisition would mean giving Compaq shareholders a chunk of HP's valuable

printing unit in exchange for a low-technology, low-profit PC business.

His reserved manner is the opposite of Fiorina's outgoing, salesmanship, but

Hewlett was greeted as a hero by merger opponents, including some HP employees,

as he strode past placards calling for Fiorina's ouster and into the hall, where

he was met by a standing ovation.

Hewlett joked that he was ready to go back to his old life as an

"academic and a musician", the phrase HP used in a nasty battle to

undermine confidence in his financial calculations that the deal would hurt

share value.

Wall Street appeared ready to give Fiorina the benefit of the doubt, as the

gap between HP and Compaq shares narrowed, moving Compaq much closer to the

level implied by the deal, but a final tally was not expected for weeks.

No pregnant chads



Fiorina said the vote was not similar to the presidential poll, when the
victor was unclear because of confusion over balloting.

"Everyone wants a hanging chad battle now," Fiorina said.

"There's an 'X' there (on the ballots). It's pretty simple. We don't have

dimpled chads, and hanging chads, and pregnant chads."

IVS Associates, which certifies the vote, is taking the ballots back to its

base in Newark, Delaware, where it will count many by hand -- and in private --

before offering both sides the chance to challenge ballots for potential flaws

like postmarks, date of submission and number of shares held.

Hewlett said he was optimistic that a tally would show that shareholders had

rejected the merger. "In a proxy contest this close, where stockholders are

changing their votes right up until the closing of the polls, it is simply

impossible to determine the outcome at this time," he said in a statement.

On Tuesday, Compaq gained 78 cents to $11.14 while HP fell 45 cents to

$18.80. With HP at that level, the deal terms imply Compaq shares should trade

at $11.89.

HP's stock has fallen 19 percent since the deal was announced on Sept. 3,

while Compaq dropped 10 percent. IBM shares rose 7 percent in the same period.

The drop in HP stock has brought the value of the deal down from $25 billion

when it was first announced to $20 billion in HP stock.

SG Cowen analyst Richard Chu said the deal seemed done. "I don't think

(HP) is going to be issuing a wild, unfounded memorandum here, so I think it

says the probability is very high that they do indeed have the vote and that it

will be ratified over the next couple of weeks," Chu said.

In addition, before the companies can close the deal, Compaq shareholders

must also approve the merger in their shareholder vote, which is scheduled for

Wednesday.

The little guy weighs in



Shareholders, who were largely negative on the deal, peppered an upbeat
Fiorina with questions about everything from layoffs to her salary during the

meeting. Picketers from Compaq's French unit protested job cuts, one placard

declaring, "Carly's dream is a nightmare for workers."

David Chen, an HP retiree who worked for the company for 23 years, said his

friends at the company are wary of the merger. "HP morale is very

low," he said. But major shareholders appeared to have fallen in line

Fiorina, aside from Hewlett and Packard family trusts with 18 percent of stock,

as financial investors calculated that the job cuts could help boost profits.

Roy Papp, head of fund manager L. Roy Papp & Associates, which voted

about 800,000 HP shares for the merger, said he thought that employees would

pull together now that the merger uncertainty is in the past. "I think the

large part of the employees' opposition is the fact that they know the merger

will cause the layoffs of 15,000 people, so obviously the employees don't want

to increase the chances of that slimming down," Papp said.

Fiorina and Hewlett both smoothed over their sharp differences, claiming

separately that HP was not "in crisis" and that the company which

helped put Silicon Valley on the map would return to the "HP way" of

pulling together no matter what decision shareholders had given.

HP claims Compaq merger victory, no official word

Hewlett-Packard Co. said on Tuesday that preliminary estimates showed

shareholders had approved its purchase of Compaq Computer Corp., a result

unconfirmed by voting officials.

HP said its view is based on a preliminary estimate by its proxy solicitor.

Voting officials are expected to take days or weeks to tally the ballots on the

$21 billion merger that has been the subject of intense debate. HP shareholders

met on Tuesday morning.

In a statement, Chief Executive Carly Fiorina described the merger as winning

a "decisive majority" of shareholder votes. That differed from Walter

Hewlett, the dissident shareholder, who said he was optimistic the vote had gone

his way. One source in his camp described the vote as being "too close to

call."

Compaq shareholders are expected on Wednesday to second the apparent decision

to back the deal, catapulting HP into a race against International Business

Machines Corp. for the title of No. 1 computer company.

Fiorina had staked her future on her belief that the computer industry was

consolidating and customers were looking for one-stop-shopping technology

powerhouses, while HP board member Walter Hewlett mounted a strong campaign to

stop an alliance he said was a mistake that would distract the company when it

most needed to focus.