HP Board Member Sees Key Support For Compaq Merger

But Phil Condit, chairman of airplane maker Boeing and an HP board member who advocates the $23 billion deal, declined to say management had a lock on winning a vote scheduled for March 19.

Condit and fellow board member Sam Ginn, former chairman of Vodafone, also revived speculation that board members and management could resign if shareholders voted down the hotly contested merger, threatening hopes HP could continue business as usual if it left Compaq alone.

"We believe we have the support of most of our 20 largest shareholders," Condit told a conference call, later cautioning, "Our discussions with those shareholders are promising, very positive, but you don't count votes that way. You count votes on proxy cards that have been submitted.'"

HP management and HP founding family scion Walter Hewlett, who says the merger would devalue HP's printing franchise by taking on the No. 2 PC maker, both claim significant support, although the latest significant investor to go public sided with Hewlett against the merger.

CalPERS, the California Public Employees Retirement System said Friday that it would vote its stake, less than 1 percent of HP stock, against the deal, and a smaller Ontario-based pension fund made the same call.

Hewlett was not immediately available to comment.

Ginn and Condit in particular argued that big technology mergers could succeed, especially with integration planning, which has been a top issue for board and management.

Analysts shy away from calling the vote on the deal, which HP says would make it into a one-stop technology shopping center for customers.

Ginn sayspension funds and trusts--such as the HP family and family foundations that plan to vote their 18 percent stake against the merger--are most interested in preserving capital, not growth, and thus too risk-averse to support the deal.

To Resign Or Not To Resign

Ginn and Condit both say if shareholders vote down the merger, they and some colleagues might leave, although they stopped short of making any predictions.

No Hewlett-Packard executive or board member is on record as saying they would resign if the merger fails, a scenario that would disrupt the company's effort to settle on an alternate strategy. But merger supporters have said it is a possibility a number of times.

"That conflict is that they will be driven by the will of the shareholders in one instance, and their own personal beliefs about what they think is the right strategy on the other side," Ginn said when asked what would happen if shareholders said "no."

Walter Hewlett has argued that the board and senior HP executives would stay on and hammer out a "Plan B" if shareholders told them to abandon the merger, a point crucial for investors concerned that HP could drift after mass resignations.

Shares of HP closed up 1.89 percent, at $20.98, and Compaq was off 4.49 percent, at $11.27, on the New York Stock Exchange, suggesting waning belief the merger would succeed as Compaq's price fell farther behind the value of HP stock implied by the deal's terms.

Condit and Ginn both say they have not made up their minds, and Ginn says it would be a difficult decision for all.

"I won't walk away and pout," he says. "What I will do is that if I decide to leave, that I have a proper replacement before I walk out the door."

He also says the pro-merger members of the board are not personally at odds with Hewlett and could work with him.

"The issue is not Walter," Ginn says. "The issue is the recommendation that Walter supports, that is where I think we disagree with Walter."

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