Hewlett Details Opposition to Deal

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A day after Hewlett-Packard Co. detailed its $23 billion plan to acquire Compaq Computer Corp., key opponent Walter B. Hewlett laid the groundwork for a potential proxy fight.

Hewlett told the Securities and Exchange Commission he plans to file a proxy statement to solicit shareholders on the matter. His filing Friday included an analysis presented to the Hewlett family's trust by advisers who concluded that Compaq was a bad deal.

Those advisers said the merger would dilute HP's profitable printer business and fail to improve HP's market position in high-end servers and services - assuming the complicated integration even could be carried out.

Hewlett has not yet decided whether to actively lobby shareholders to vote the deal down, but Friday's filing lets him keep his options open, a spokesman said.

Hewlett, whose family interests own more than 5 percent of HP stock, is the oldest son of HP co-founder William Hewlett and also a member of HP's board.

His filing said he was joined by sisters Eleanor Hewlett Gimon and Mary Hewlett Jaffe, the William R. Hewlett Revocable Trust and one of its trustees, Edwin E. van Bronkhorst, a former HP chief financial officer.

HP shares fell 59 cents, or 2.7 percent, to close at $21.50 on the New York Stock Exchange on Friday. Compaq shares lost 40 cents, 3.7 percent, to $10.30.

Analysts and investors will pore over the fine print of the prospectus HP and Compaq filed Thursday to decide whether to support the deal or join in opposition with Walter Hewlett.

With a 10.4 percent stake, HP's largest shareholder is the charitable foundation begun in 1964 by HP co-founder David Packard and his wife, Lucile.

The organization's chief financial officer did not return a call seeking comment Friday, but he has said the prospectus would be key as the foundation reaches its decision over the next few weeks.

Packard's son, David W. Packard, who came out against the deal and sharply criticized HP management last week, is not on the board of the foundation, though two of his sisters are.

HP and Compaq said together they would create a market leader in business computing and data storage, improve the economics of their struggling personal-computer divisions and ``create a stronger, more efficient operating model with increased potential for growth.''

The report said the companies combined would have lost $614 million in the nine months ended July 31. But HP and Compaq contend that because of cost savings and new opportunities, the deal would boost their combined operating profit by $2.5 billion in 2004.

Faced with the prospect that opposition by the sons of HP's revered founders could sink the deal and put her job in jeopardy, chairwoman and chief executive Carly Fiorina this week sought to reassure employees that she is not at odds with the heirs.

In an internal memo disclosed to the SEC, Fiorina said many news media have made too much of Hewlett and Packard's criticisms and ``think they have a story they can use to sell newspapers.''

``I get frustrated when I see lazy reporting on complicated issues,'' she wrote. ``It is far easier to dream up a feud that doesn't exist than to research complex, far-reaching, industry-changing business concepts.''

Asked to elaborate, HP spokeswoman Rebeca Robboy said Fiorina is keeping an ``open dialogue'' with Hewlett, Packard and their foundations. Hewlett attended HP board meetings Thursday and Friday, but Robboy said she could not comment on what transpired.