HP Will Keep Compaq Brand, Capellas Says

Compaq Computer Hewlett-Packard

Capellas, who announced that Compaq shareholders voted to approve the $21 billion deal by a 9-to-1 margin, also defended a PC business that critics of the deal said would hurt HP.

"I absolutely believe that the PC business, which was much maligned through this process, is really a fundamental and strategic business," Capellas said. He said that, following an HP merger, the combined company would seek to leverage Compaq's PC business.

"In the first place, there is a huge brand equity in the Compaq name," Capellas said, responding to a reporter's question. "One should not assume the Compaq brand equity will not be taken advantage of. We will take advantage of it. We will leverage that Compaq brand name as we roll out different product sets."

Capellas, who is in line to become president of the new HP, said he would not immediately house-hunt in the area near HP's Palo Alto, Calif., headquarters because of his frequent time on the road. That would probably not be true of HP Senior Vice President Peter Blackmore, in line to become HP's top server executive post-merger.

"Blackmore will be in house-hunting mode rather quickly," Capellas said.

While Compaq's shareholder vote ended with no doubt as to the outcome, it is expected to take between four and six weeks for an independent voting consultant to count HP's shareholder votes. HP executives a day earlier declared victory in their hard-fought proxy fight against dissident director Walter Hewlett, but made it clear the result was not official and the company would continue to wait for the certified results.

Capellas declined to say how many layoffs Compaq employees would face, or when they would start. He also suggested that the integration of the combined company would not be an immediate accomplishment and would depend on close communication throughout the new, large company.

"The real integration happens as you start to go levels down in the organization," Capellas said. "As we all know, it's a communications game."

He also declined to say if he believes Hewlett, who was blistering in his criticism of Compaq and its PC business throughout his anti-merger campaign, should remain on the board of directors of the new company. The reformulated board would include five directors from Compaq and seven from HP.

"It is really a decision for HP to make," he said. "I really am going to leave it to them. I will give Walter the tribute of having the strength of conviction."

Asked about the state of the industry's economic recovery, Capellas was as non-committal as he was about integration plans.

"I do think when we put the [projected numbers into play, we had not built in the strength of the economic recovery," he said. "I think we all believe the recovery is going to come. ... I've heard the rumor that the recession is over. That's not quite obvious to many of us."