Peter Henderson
SAN FRANCISCO: Compaq Computer Corp. chief executive Michael Capellas said on
Wednesday that his company and Hewlett-Packard Co. were determined to hold
shareholder votes in March on their $22.3 billion merger, and said regulatory
approval was on track for that to happen.
"I think I can speak for us collectively - HP - here. We are absolutely
bound and determined to get the vote in March," he said in an interview
with Reuters. "All the processes are moving forward. Whether it's filing
the S-4 (merger plan document), regulatory approval, all the things are going
through," he said.
A decision by European regulators on whether to approve the deal or prolong
their investigation by four months -- and potentially challenge part of the plan
-- is due by Thursday, but Capellas said he did not have official word on the
ruling.
Whether the merger will be approved by shareholders is also still an open
question. The deal has run into fierce opposition from key shareholders
including HP director Walter Hewlett, the son of company co-founder William
Hewlett.
Capellas and Hewlett-Packard chief executive Carly Fiorina this week
independently briefed Institutional Shareholder Services, a company which will
advise fund managers how to vote on the merger. Capellas said it would affect a
"tremendous" number of funds but declined to say how the meetings
went.
"I honestly feel better now than I did, say, four to six weeks
ago," he added in a presentation to investors. In mid-December the final
undeclared Hewlett-Packard founding family trust threw in with other family
members against the merger, increasing the opposition bloc to 18 per cent of HP
stock.
But Compaq and HP had not estimated their support before setting in motion
the voting process, Capellas told Reuters. The companies have said that
shareholders of record on Jan. 28 will vote on the deal, and by doing that they
have tied themselves to a vote by the end of March. Capellas said they could
change the date but did not plan to.
"We are watching pretty damn carefully -- we don't see that
happening," he said.
His company had delivered stronger than anticipated results in the fourth
quarter and earlier this week raised its forecast for 2002, both of which would
bolster support for management and thus the merger, he added.
Strong results needed
That was especially important after the Sept. 11 attacks and other issues skewed
third-quarter results, he said.
Fiorina has urged employees to focus on delivering results for the company's
fiscal first quarter, which ends on Thursday and will be reported in the middle
of February. Those numbers will be key to helping many investors decide which
way to vote on the merger, Capellas said.
"Strong results from HP would indicate that we've been focused and
continue to execute," he said. Capellas told the investors at the
conference, organized by Banc of America, that the companies had made it through
the period when they were most vulnerable to customer defections.
"My biggest fears about revenue loss were in the quarter that just
passed," he said. "Quite frankly it doesn't look like either company
has lost much momentum."
He laid out the integration of the firms, which have total sales of $80
billion to $90 billion, as a fairly straightforward job and said Compaq's
acquisition of Digital Equipment Corp, had been a success after initial
stumbling.
Compaq tried to reorganize the sales forces while integrating and did not
clarify its product line and assign responsibility for implementing changes, he
said. "There is not a lot of magic to what you have to do, but the product
road map piece and the accountability piece was actually missing early" at
DEC, he said.
In a statement issued Wednesday, Hewlett said that studies showed most
technology mergers were a failure, including the Compaq-DEC alliance. Hewlett
argues that HP is taking on a vendor of commodity computers instead of a
technology leader. HP and Compaq say they are addressing industry changes as
well as saving money.
"History shows that management's optimism does not provide an escape
from the economic reality that business model, not scale, determines success in
commodity computing," Hewlett said in his statement.
HP has promised to quickly boost earnings and immediately to begin cutting
some $2.5 billion in costs. "Whenever you have mixed opinions, you have to
have early successes," Capellas said.
(C) Reuters Limited.