HP to delay joint operation date

HP shares are continuing to drift lower on Wall Street and hit the $17.75

mark on Wednesday as more and more shareholders who opposed the merger are

selling their HP shares in anticipation of a narrow majority of shares having

voted for the merger.

Some analysts say HP's shares could end up below $10 a share if the merger is

less successful than management has been projecting. Already HP announced it is

delaying the official integration of the two companies for a number of reasons.

For one, it may be several more weeks before the merger vote results will be

officially known. Because the vote is a virtual tie, every last vote has to be

counted and many of the ballots have to be counted by hand.

HP's Webb McKinney and Compaq's Jeff Clarke, who head the 900-person

integration team said in an email to the employees of both firms that H-P and

Compaq might not begin operations immediately after they file all their legal

merger documents. "We will not necessarily launch the new company on the

legal closing date. The new management team needs a few days to transition their

operating plans from the 'clean teams' to their respective staff and line

managers."

HP executives had planned to complete the merger in the first week of April.

The combination will still happen in the first half of 2002, Clarke said. More

than 1,200 HP and Compaq managers are part of "clean teams" that

organize integration planning. The number of clean-team employees is expected to

increase as the merged company moves closer to its official launch, the filing

said.

McKinney and Clarke also cautioned employees that not all organizational

decisions will be made by the official merger date. The top priority is to

minimize customer disruption. Until the combination is completed, HP and Compaq

are legally required to function as competitors. HP and Compaq have instructed

employees who are not on clean teams not to mingle with employees in other parts

of the company.

In a separate letter to employees on Wednesday from HP chief executive Carly

Fiorina and Compaq CEO Michael Capellas, HP said it will begin to list the new

management team's direct reports within the next week.