HP, Hewlett Trade Jabs on Compaq Merger

Hewlett, a son of legendary HP co-founder William Hewlett who has spearheaded the opposition to the deal and been dismissed by HP as a musician and an academic, says HP's claim the board had fully considered alternatives to the deal "pure fantasy."

"The notion that HP's full board has considered, debated and rejected every alternative we now suggest completely defies the record and common sense," Hewlett said in a statement.

He says the CEOs of the two companies had first discussed the merger a few months before announcing it last September. HP says its board had been weighing alternatives to the merger for two and a half years.

Hewlett as a board member took part in making decisions, although HP has repeatedly said he missed some meetings on the Compaq deal and in a fresh letter to shareholders Monday said Hewlett had mischaracterized the deliberating process.

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"Once again Walter has offered up platitudes, not a plan," a spokeswoman added after Hewlett argued that HP should focus on smaller acquisitions and improving its highly profitable printing business.

In dueling press releases ahead of the March 19 and 20 votes by Hewlett-Packard and Compaq shareholders, both sides are contesting each point the other raises and spicing arguments with increasingly heated exchanges.

In essence, Hewlett argues that HP should consider trimming its low-margin PC business instead of expanding it through the Compaq deal, that the printing franchise would be diluted by the merger and that technology mergers in general have a poor track record of success.

HP management counters that buying Compaq would make it number one in many areas, including high-end servers and services, and that the technology industry is consolidating, entering a new era that will favor larger companies.

Lately, both have focused on the timing of the deal. HP argues that in a slow economy, "this is precisely the time to do a merger of this magnitude, because valuations are better, customers are placing IT purchases on hold, competitors are in a holding pattern, and it offers time to execute and integrate."++

Hewlett responded Monday that the assertion competitors were in a holding pattern was "a delusional and alarming statement for all readers."

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