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Hewlett, HP prepare for fierce shareholder battle

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CIOL Bureau
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One of the fiercest corporate battles ever seen in Silicon Valley may unfold

next week as Walter Hewlett, eldest son of HP co-founder Bill Hewlett and member

of HP's board of directors has initiated a "proxy vote" battle.

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Already controlling some 7.5 per cent of HP's shares, Hewlett is expected to

announce that he will ask other HP shareholders, especially those holding large

blocks, to assign the voting rights of their shares to the coalition he is

building against the merger of HP and Compaq.

"He's going to go to war. He could make a strong case that HP is better

off not having Compaq,'' said Patrick Adams, a fund manager at Choice Investment

Management, which owns shares of Compaq. In preparation for a proxy vote battle,

HP has hired a proxy-solicitation firm of its own.

To void the deal, Hewlett needs a majority of the votes cast in the

shareholders' vote on the merger proposal.

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Should the Packard family throw its support behind Hewlett, they would

control more than 20 per cent of total HP shares, which could translate into 30

per cent of the votes needed, depending on the percentage of shares that are

voted. Key to whether the HP-Compaq deal will succeed -- and whether Carly

Fiorina will keep her job -- is Richard Hackborn, now the elder statesman on the

Hewlett-Packard board, the link to a magical past and the man who fought hard

for Fiorina's appointment as chief executive more than two years ago. Hackborn

is being pulled between his loyalty to Fiorina and his allegiance to an

organization that shows signs of rejecting her.

Hackborn has not made any public statements on the controversy. But friends

describe him as full of angst about the way the proposed merger is being

received.

Should the results disappoint, many will seek to vote against the deal, which

will likely bring years of further uncertainty for the new combined HP-Compaq

operation.

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