HP/COMPAQ - Hewlett discusses plan for Compaq-free HP

Merger opponent and Hewlett-Packard (HP) board member Walter Hewlett has a three-part plan for HP's future without Compaq Computer: Expand HP's lucrative printer business, scale back its PC business and fill in gaps in its line of enterprise products, software and services.

Hewlett also said he expects HP Chairman and Chief Executive Officer Carly Fiorina to leave the company if the merger fails. He does not expect many other resignations from HP's senior management or board of directors -- even though he is the only board member opposing the merger. Hewlett's comments came in an interview with the Wall Street Journal (WSJ), recounted in an article published Monday.

With HP and Compaq's shareholder votes on their proposed merger a bit more than a month away, both sides are ratcheting up their public crusades, launching ad campaigns and blitzing shareholders with letters and reports. HP has created a Web site, http://www.votethehpway.com/, to argue its case; Hewlett and his team have their own site at http://www.votenohpcompaq.com/.

Hewlett told WSJ that he expects to remain on HP's board, whether or not the merger goes through. Hewlett is the son of HP co-founder William Hewlett, and has been a member of HP's board since 1987. He initially supported the Compaq deal. When it was announced in September, the plan had the unanimous backing of both companies' boards. Hewlett later reversed his position, citing the extent of the shareholders' backlash as a key factor. He has since become a leader in the proxy bid to defeat the merger.

Hewlett is joined in his opposition by other family members of HP's late co-founders. The proxy fight is being led by Hewlett, the William R. Hewlett Revocable Trust, and Edwin E. van Bronkhorst, former chief financial officer of HP and a trustee of several Hewlett and Packard family trusts and foundations. Also intending to vote no on the merger are the William and Flora Hewlett Foundation and the David and Lucile Packard Foundation. The HP heirs and their foundations collectively control around 18 percent of HP's outstanding shares.

One longtime HP board member, George Keyworth, blasted Hewlett's plans for HP as "blatant platitudes" and told WSJ the company would be massively disrupted if the merger is not completed. Another HP director, Richard Hackborn, has suggested in the press that if the deal falls through, he and several other board members may not stick around. Hackborn, who retired in 1993 after a 33-year career with HP, resigned in December from the board of the William and Flora Hewlett Foundation over disagreement about the merger.

Hewlett did not go into detail about his plans for a solo HP, although he did say that a needed restructuring of HP's PC business could involve some plant closures.

"What HP needs is focus, not breadth," Hewlett told WSJ.

HP will hold a meeting for its shareholder vote on the merger on March 19 in Cupertino, California. Compaq will hold its shareholder vote on March 20 in Houston.

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Stacy Cowley

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