HP Claims Victory in Compaq Vote, Hewlett Refuses to Concede

Hewlett-Packard Co. (HWP) Tuesday claimed victory in the bitterly fought battle for shareholder votes in its acquisition of Compaq Computer Corp. (CPQ), but dissident board member Walter Hewlett refused to concede defeat, saying he was still optimistic the deal had been rejected.

HP Chief Executive Carly Fiorina said at a press conference that the margin of victory was "slim but sufficient."

She said in a statement that a majority of shares not affiliated with the Hewlett and Packard families and foundations appear to have been voted in favor of the deal.

A final tally isn't expected before a few weeks.

The two sides had been waging a war in the press as Walter Hewlett gathered fellow dissenters to join Hewlett and Packard family members, who hold an 18 percent block of shares, in trying to stop the deal.

Fiorina has staked her career on the merger, arguing that buying Compaq will build a computer giant to compete with International Business Machines Corp.

Walter Hewlett, who is the son of a company founder, has argued that the deal will dilute HP's strong printing division and saddle it with a low-margin personal computer business.

He said separately that he was optimistic that a tally, which could take a few weeks, would show that shareholders had rejected the merger. A source close to Walter Hewlett said the vote was too close to call.

The meeting hit the same frenzied note that has marked most of this battle. Walter Hewlett entered the hall surrounded by a throng of reporters and was given a standing ovation.

Fiorina, who took the stage about 30 minutes late to give the crowd time to assemble, was greeted by somewhat less applause as she asked investors once more to vote with the board and approve the merger.

She took questions from shareholders almost immediately, answering concerns about the planned 15,000 layoffs and the future of HP if the merger fails to be approved.

"This is not a company in crisis. It is a strong company," she said. "If this merger were to be voted down, we would go back and relook at our alternatives again."

Shareholders came from as far as France and as nearby as Palo Alto to weigh in on the plan, with one French Compaq worker wearing a placard that said, "Carly's dream is a nightmare for workers."

Jacques Fossourier, a French citizen who lives in Silicon Valley, said he had changed his mind on how to vote his 2,000 shares, taking advantage of HP's rule that allows investors to vote more than once.

"I voted 'no' first and then voted 'yes' afterward," he said. "HP by itself and Compaq by itself are going to be struggling, struggling, struggling."

The shareholders peppered Fiorina with questions during the meeting, asking her about her salary and questioning support for the merger from HP employees. Some recent surveys done for a Packard family member showed that employees at several HP locations are against the deal. Fiorina disagreed.

"I don't think it represents what is going on," she said. "The majority of our employees support this merger."

When greeted with a surprised noise from the crowd along with a few boos, Fiorina wryly smiled and replied: "Ladies and Gentlemen, that is a fact," adding that she wasn't speaking about retirees.

Before the meeting, opponents led by Walter Hewlett had gained slightly more public support, with about 24 percent of shareholders against the merger -- including many HP employees' pension plan shares -- compared with about 20 percent seen for management.

That includes about 10 percent of shareholders from index funds bound to follow the advice of Institutional Shareholder Services, an advisory firm in favor of the all-stock deal.

Walter Hewlett, who says Fiorina should leave, wants to focus the company on its printer operation and maintains that the merger instead would bloat its low-profit personal computer operation and distract employees, giving rivals an edge.

Fiorina, brought in three years ago to shake up the sleepy company known as much for bureaucracy as technology, says the deal would better position HP against IBM, creating a new services and high-end computer powerhouse.

Slowing technology sector growth has set the stage for an industry consolidation where bigger companies with relatively lower fixed costs would pull ahead, she said.

However, those reasoned arguments faded quickly in the contest, as both sides got personal.

HP called Walter Hewlett, who had initially voted with the HP board for the deal, a dilettante academic and musician who "flip-flopped" in his decisions while Hewlett said HP needed a CEO who was not learning on the job,

HP's stock price, meanwhile, has fallen 17 percent since management announced the deal on Sept. 3, while Compaq has dropped 27 percent, an indication investors doubt the deal will be pulled off, since Compaq shares should have risen toward the price implied by the merger's terms if it seemed likely.

IBM shares have risen 12 percent in the same period.

Reuters and the Associated Press contributed to this report.