Packard foundation likes HP results, mulls merger

By : |November 20, 2001 0

Peter Henderson

SAN FRANCISCO: The Packard family foundation whose support is a key to
Hewlett-Packard Co’s plan to buy Compaq Computer Corp., has not decided how to
vote on the deal despite HP’s "very encouraging" quarterly results, a
foundation officer said on Monday.

HP’s fourth quarter net profit dropped 89 per cent, but operating results
reported last week easily beat Wall Street forecasts thanks to
higher-than-expected sales and deeper-than-expected cost cutting.

"I think the fourth quarter earnings were very encouraging. They were
strong earnings, they beat estimates, and that is good," George Vera, chief
financial officer of the David and Lucile Packard Foundation, said in a
telephone interview.

"Anything that has the stock turning up is certainly welcome, and it
shows some strength in their markets."

The merger plan pits some of the heirs of HP founders Dave Packard and Bill
Hewlett against management, and Wall Street is openly skeptical of the benefits
of the $23 billion merger, which Chief Executive Carly Fiorina says quickly will
improve profits thanks to cost savings.

Vera also said the results reflected management’s ability to cut costs.
"Yes, I think it showed that they were able to do it in the fourth
quarter," he said.

Analysts who had watched the company revise or miss forecasts for the
previous four quarters said the fourth quarter performance would bolster
Fiorina’s case that her team could carry off the integration, although many
still question the strategy of the merger.

The foundation, with a 10.4 per cent stake in HP, is the company’s single
largest shareholder and is run by the three Packard sisters, Susan Packard Orr,
Nancy Packard Burnett and Julie E. Packard.

Their brother, David, and Hewlett family members, who have all opposed the
Compaq deal, together hold under 10 per cent of the firm, founded in 1939.

Not committed
The Packard sisters have not taken a public stance on the deal, and Vera said
consultant Booz-Allen & Hamilton was evaluating the deal for the foundation.

Vera had said the foundation would look to merger plan filings and fourth
quarter results to determine what would be best, long term, for Hewlett-Packard.
But Vera said the foundation had not settled on a preliminary decision on the
merger. "No, I would say we haven’t. We are continuing to study
everything," he said.

"There is a lot of material here to digest," he added. "Our
target is sort of sometime in December or early January." The next
scheduled board meeting for the foundation is Dec. 7.

Financial analysts have said support by the Packard Foundation would keep the
deal alive, while opposition would sharply cut management’s chances of pushing
through the acquisition in the current form. Hewlett-Packard and Compaq stock
rose 5 cents each to $21.55 and $10.35, respectively, on the New York Stock

(C) Reuters Limited.

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