Fiorina pleads her case on Wall Street

Three weeks before a crucial shareholder vote, HP CEO Carly Fiorina returned

to Wall Street on Wednesday one last time to plead with investors to approve the

$21 billion merger with Compaq and with it extend her career at the $60 billion

computer and printer company.

Fiorina said the merger is vital for HP's future and will enable HP to offer

more complete packages for corporate customers because of Compaq's strength in

personal computers, Windows-based servers, data storage and services.

The deal merger approval is also crucial to Fiorina's future. Not only is she

expected to resign or be fired if the deal fails, she will suffer huge personal

financial losses. HP had planned to provide Fiorina with up to $70 million in

salary increases and bonuses over the next two years if the deal gets completed.

Although the package was never approved, a similar compensation is expected

after the merger goes through.

Answering critics who believe the Compaq PC business will be a drag on HP's

future profits and share value, Fiorina said, "PCs are not a bad business.

PCs have the opportunity to be a great business. You just have to measure it by

the right yardsticks.''

Fiorina asked the investors to ignore the arguments of the opposition led by

HP director Walter Hewlett and David Packard Jr. "They are trying to

mislead investors because they cannot win this campaign on the substance.

Don't be distracted by the so-called `focus and execute' plan. It is not a

plan - it is a press release.'' Instead of debating the arguments against the

merger, Fiorina focused most of her day-long discussions with analysts on

merger's projected financial benefits. "Do we retreat into the past and

surrender our future? Or do we choose to put all of this energy and effort and

commitment to work so that we can lead and grow? That choice now rests with our

shareowners, and we look forward to your support.''

When they finally got a chance to ask questions, Fiorina underwent a severe

grilling from the analysts. She refused to speculate what would happen to her or

the company if the merger is rejected. She did say the management would have to

"go back and look at all of our alternatives again.''

Hewlett meanwhile filed a new 48-page report with the Securities and Exchange

Commission reiterating his position that HP is overpaying for Compaq and that

integrating the companies is too risky. He also ran new full-page newspaper ads

urging shareholders to vote against the merger.

Whether the merger will be approved will likely hinge on the advise to Wall

Street from Institutional Shareholder Services a small company that analyzes

corporate mergers for Wall Street institutional investors. The company has

traditionally given "two thumbs down" to large high-tech mergers.

Analysts said the ISS recommendation could sway between 30 and 40 percent of

the votes. ISS expects to publish its opinion of the deal on March 4 or 5.

Fiorina warned that HP's business computer operations could faces problems if HP

failed to buy Compaq. "The technology industry is consolidating and only

bigger companies that can serve customers' every need will succeed. In a

consolidating industry, do we ensure that our enterprise computing business has

scale to truly be a platform of choice, or do we allow it to be subscale and

slowly wither?"