"All that is old and already formed can continue to live only if it allows within itself the conditions of a new beginning."
War Of Words Heats Up Over HP-Compaq Merger Bid
WASHINGTON, D.C. 20 Dec 2001 -- The verbal skirmish between Hewlett-Packard Co and company board director Walter Hewlett is heating up: A Hewlett lawyer has demanded the company divulge which of its management team and board members would quit if a proposed HP-Compaq merger falls through.
Richard Hackborn, a member of the HP board and a strong backer of HP CEO Carly Fiorina, told the New York Times on Dec. 12 that if the merger fails, he and others in the company will resign. Those who oppose the deal -- Walter Hewlett among them -- have no other plan for the company's future, Hackborn told the newspaper.
"If the merger gets turned down by shareholders," Hackborn told the Times, "they will have to get a board and a management to fix the PC business and these other problems."
The same day the article was published, Hewlett's attorney, Stephen C. Neal, fired off a letter to Larry Sonsini, attorney of Hewlett-Packard, expressing dismay at Hackborn's statements. In that letter, made public in a "definitive proxy statement" filed with the U.S. Securities and Exchange Commission today, Neal demands an immediate accounting.
"Although you previously discounted these reports in conversations with me, the threats no longer can be ignored," Neal wrote to Sonsini. "This type of threat by a member of the board or management of any company, and particularly a company like Hewlett-Packard, is shocking."
The letter continues, "The threats raise serious questions about the directors' compliance with their fiduciary duties and clearly are not in the best interests of shareholders."
Neal also stated that if the newspaper report is accurate and the threats are real, Hewlett-Packard owes it to shareholders to divulge which managers and board directors plan to bail out.
"This information is clearly material and the failure to provide such information could result in significant liability to Hewlett-Packard and its officers and directors," the letter states. "If the threats are not true, then Hewlett-Packard must immediately correct the record."
On Dec. 13, the SEC posted a letter to the agency written by Walter Hewlett, which expressed his ongoing opposition to the $22.2 billion merger. In it, Hewlett called for a "speedy, mutual unwinding of this transaction."
At that point, Hackborn actually did resign from as a board member of the Hewlett Foundation, the company's charitable arm.
Executives from both Hewlett-Packard and Compaq responded to the Hewlett letter, according to a Dec. 13 SEC filing. That document indicates that HP management took "major exception" to Hewlett's letter, and that a subsequent letter from Compaq's board echoed the point, saying the company "strongly disagrees with your (Hewlett's) conclusions."
However, Walter Hewlett is not standing alone in his opposition. This month, members of the Packard family pledged that they, too, would vote against the merger. The families fear that combining with Compaq would force HP to rely on low-margin PC business, and would result in too many layoffs. Together, the families control about 18 percent of HP's shares.
Still, CEO Fiorina is sticking to her guns. In a separate SEC report filed today, she said that she respects the Hewlett and Packard families, but was "disappointed and sad" at their opposition to the deal.
"Ultimately, it is our (HP board and management team's) responsibility to build healthy, sustainable businesses," the CEO said in the government filing. "That is the best way to protect jobs, it is the best way to serve customers and it is certainly the best way to serve the majority of our shareowners."
Added Fiorina, "We are absolutely convinced that while this company always has options. ... We have chosen the best one."
At close of trading today on Wall Street, Hewlett Packard shares were down 26 cents, or 1.25 percent, to $20.50.
Reported by Newsbytes.com, http://www.newsbytes.com .
Kevin Featherly, a former managing editor at Washington Post Newsweek Interactive, is a Minnesota journalist who covers politics and technology. He has authored or contributed to five previous books, Guide to Building a Newsroom Web Site (1998), The Wired Journalist (1999), Elements of Language (2001), Pop Music and the Press (2002) and Encyclopedia of New Media (2003). His byline has appeared in Editor & Publisher, the San Francisco Chronicle, the St. Paul Pioneer Press, Online Journalism Review and Minnesota Law and Politics, among other publications. In 2000, he was a media coordinator for Web, White & Blue, the first online presidential debates.
Copyright 2004, by Kevin Featherly