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EU clears HP, Compaq mega-merger

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CIOL Bureau
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BRUSSELS: The European Commission said on Thursday it had approved without

conditions Hewlett-Packard Co.'s proposed $22.3 billion takeover of Compaq

Computer Corp.

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"A careful analysis of the merger...and of the competitive forces in the

markets concerned has shown that HP would not be in a position to increase

prices and that consumers would continue to benefit from sufficient choice and

innovation," the Commission said in a statement.

European clearance, which had been widely expected, is not the final hurdle

for the merger of the two US-based global providers of computing and enterprise

technology solutions.

The transaction, which would be the largest merger in the history of personal

computers, remains under review by the Federal Trade Commission in the United

States and several other jurisdictions.

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Its highest hurdle, however, will probably be winning shareholder approval in

a vote expected in March. "This is an important milestone, particularly

given the significance of Europe to us," said Michael Capellas, Compaq

chairman and chief executive officer, in a statement.

"We will continue to work with regulators around the world in satisfying

their requirements."

HP chief executive Carly Fiorina also welcomed the decision as "an

encouraging step in the continuing process of satisfying regulators worldwide

that this deal will provide a real stimulus for competition in information

technology markets".

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Commission sees no domination risk



Fiorina has had a tough battle selling the merger, announced in September, after
members of the Hewlett and Packard founding families said in December they

planned to vote against the deal.

HP board member Walter Hewlett and other critics say that purchasing Compaq

would dilute the value of the company's well-known imaging franchise -- printers

and fax machines -- and saddle it with a big PC division when a focus on the

development of high end machines was needed.

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But Fiorina has said the deal is a necessary step. "To remain static is

to lose ground," Fiorina told an audience earlier this year, quoting Dave

Packard, the co-founder of HP.

Hewlett said in a letter to shareholders that the opponents also do not want

to lose ground: "We want it clearly understood we are not advocating a

'status quo' strategy for Hewlett-Packard. We advocate building on

Hewlett-Packard's strengths and dealing with its problems".

Fiorina commented in New York this week about the intense debate with the

family members. "There are people who find change exiting," she said.

"Others find it exhausting. Some find it exhilarating. Others find it

intimidating. Others know they will gain from it. Some fear they will lose from

it."

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The European Commission said the merged group would continue to face strong

competition in Europe from a number of credible rivals, including IBM, Dell and

Fujitsu-Siemens.

It said this, along with the absence of significant barriers to entry and the

practice of non-exclusive contractual relationships between retailers and

manufacturers would prevent the new HP from attempting to raise prices

significantly.

It said the proposed deal was also unlikely to raise competitive issues in

the market for servers and printers.

(C) Reuters Limited.

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