HEWLETT family opposes deal to purchase struggling Compaq Computer, Packards unsure
Wednesday, November 7th 2001, 12:00 am
By: News On 6
PALO ALTO, Calif. (AP) _ Casting doubt on what would be one of the biggest high-tech deals ever, the family of Hewlett-Packard Co. co-founder William Hewlett will vote their 5 percent stake in the company against the proposed $21 billion acquisition of Compaq Computer Corp.
HP's biggest shareholder, the Packard family foundation _ which owns more than 10 percent of HP's stock _ has not decided whether to support the deal. The $5 billion foundation has hired advisers to help determine its decision.
``It has tremendous consequences for us,'' said Robert Stephens, a son-in-law of co-founder David Packard and a member of the foundation board.
Walter Hewlett, Hewlett's son and a member of the HP board, said the company can create better value for shareholders without adding Compaq. He said the deal would give the new HP too much exposure to the struggling personal computer industry and dilute its profitable printer business.
Hewlett voted for the acquisition when the board originally allowed chief executive Carly Fiorina to pursue the deal.
She has come under intense criticism this year as HP's profits and sales have fallen. Wall Street has been sour on the Compaq deal since it was announced on Labor Day, knocking the value down from the original $25 billion.
A spokeswoman for Fiorina did not immediately return a call for comment.
Investors opposed to the deal said Tuesday's announcement made an important symbolic statement.
``It sends a strong message to the board from a sizable shareholder that's got more stake than just their investment,'' said David Katz, president of Matrix Asset Advisors, which has large stakes in HP and Compaq. ``We think it opens the door for the board to reconsider the transaction.''
Other investors agreed, pushing HP shares up 17 percent, or $2.92, to $19.81 Tuesday on the New York Stock Exchange. Compaq shares fell 5.5 percent, or 49 cents, to close at $8.50.
``While we regret very much the Hewlett family's decision, we are not surprised,'' HP management said in a statement. ``The HP board of directors and HP and Compaq remain fully committed to the merger and expect shareholder approval.''
The company said it would soon file detailed documents about the acquisition with the Securities and Exchange Commission that ``will serve as the basis for thoughtful shareowner evaluation.''
William Hewlett and David Packard founded the company in a Palo Alto garage in 1938 with $538 of their own money and built it into one of the world's premiere technology companies. Hewlett died in January; Packard died in 1996.
The men are revered at the company _ many people still talk about the days of ``Bill and Dave,'' and their old offices are preserved exactly as they were decades ago, down to the funky yellow floor and the low-tech phones on their desks.