Fiorina again makes pitch for Compaq

Brian Bergstein

Friday, March 1, 2002 | 9:57 a.m.

With her strategy and possibly her job on the line, Hewlett-Packard Co. chief Carly Fiorina appealed directly to Wall Street analysts this week for their support of the $21.5 billion purchase of Compaq Computer Corp., calling it vital for the company's future.

The acquisition, which would be the technology industry's biggest ever, is the subject of a vicious proxy fight headed to a shareholder vote March 19. Though several big investors have come out against the deal, analysts say the race is too close to call.

In an all-day meeting at a New York hotel that was broadcast over the Internet Wednesday, Fiorina asked analysts to ignore the fervent opposition of dissident HP director Walter Hewlett. She spent most of her time detailing the deal's projected financial benefits.

She said HP will be able to offer more complete packages for corporate customers because of Compaq's strength in personal computers, Windows-based servers, data storage and services. She played a video with pro-merger testimonials from big customers.

"PCs are not a bad business," Fiorina said. "PCs have the opportunity to be a great business. You just have to measure it by the right yardsticks."

Still, she also slammed Hewlett and fellow heir David W. Packard, who sponsored independent polls that found widespread employee opposition to the merger at two HP sites.

She said both men are trying to mislead investors "because they cannot win this campaign on the substance."

"Don't be distracted by the so-called 'focus and execute' plan," Fiorina said, referring to the alternate strategy Hewlett proposes. "It is not a plan -- it is a press release."

During a one-hour grilling by analysts at the end of the meeting, Fiorina refused to speculate on what would happen to her or the company if the deal is rejected, though she said her team would "go back and look at all of our alternatives again."

Befitting the closeness of the proxy fight, Fiorina sometimes sounded like a political candidate on the eve of an election.

"Do we retreat into the past and surrender our future? Or do we choose to put all of this energy and effort and commitment to work so that we can lead and grow?" she said. "That choice now rests with our shareowners, and we look forward to your support."

The meeting featured presentations from other top HP executives as well. Chief Financial Officer Bob Wayman said HP's pro forma earnings per share in 2003 could be $1.51 with Compaq, $1.35 without, a 12 percent improvement.

Several analysts said they give the deal a 50-50 chance of going through but added that the key development will be the report expected in the next week from Institutional Shareholder Services.