Fiorina Says Planning Numbers Misrepresented By Hewlett

That's the point Hewlett-Packard attorney Boris Feldman sought to drive home in Tuesday afternoon's testimony from HP CEO Carly Fiorina.

Fiorina, who was on the witness stand for close to six hours in Wilmington, Del., Chancery Court giving testimony in the suit seeking to block the HP merger, rebutted charges that HP management withheld deteriorating revenue forecasts from shareholders in order to win shareholder approval for the Compaq merger.

"The value capture process is where you I.D. all of the opportunities to capture value," she testified. "You then translate that into plans of record in which you execute against."

She said that looking at value capture numbers on which Hewlett's attorneys are basing much of their fraud claims against HP management is like looking "at a single snapshot instead of a whole movie."

She said that as new people are brought into the planning process, "human dynamics are to come up with new numbers you can knock out of the park."

Earlier in the day, attorneys for dissident HP board member Walter Hewlett charged that value capture (VC) numbers produced by merger planning teams were significantly below forecasts shown in HP's Dec. 19 proxy statement. But Fiorina characterized the shortfalls as normal gaps in an ongoing planning process.

She said that she didn't feel compelled to share fluctuating planning numbers with shareholders. "There is always a period of time when gaps [in revenue numbers get worse before they get better; it's part of human dynamics."

What's more, rather than alert shareholders that revenues and earnings for the combined company might be lower than expected, as apparently indicated in some VC numbers from business unit managers, she said that in January she contemplated raising her forecast projections.

HP had originally projected a 4.9 percent revenue loss in part because it calculated Compaq would loose 40 percent of its Unix business during the pre-merger period and HP would lose 30 percent of its NT server business. But in fact, both areas saw sequential growth from the time the merger was announced Sept. 4 through the end of the year.

Fiorina also revealed on the stand that May 7 is the official launch date for the new company if the merger battle ultimately overcomes this final legal hurdle.

HP lawyers Tuesday spent more time defending against charges that HP coerced Deutsche Bank into switching 17 million votes for the merger it had previously voted against it.

While that was the primary charge in Hewlett's suit filed March 28, Hewlett attorney, Stephen Neal, who said in court that his numbers are usually correct, apparently calculated that the 17 million votes were insignificant. Last week, a preliminary vote count showed that HP won its merger fight with Hewlett by 45 million votes.

Neal spent most of his morning session alleging that VC numbers withheld from shareholders was a deliberate attempt by HP management to withhold information from shareholders and win proxy votes for the merger.

Fiorina denied knowledge of an alleged $1 million bonus that was to be paid to Deutsche Bank if the merger succeeded. She said the first time she addressed the asset side of Deutsche bank was on March 18, and denied that any coercion was used to induce the company to switch votes. She said she hadn't given the bank her merger pitch because as an index fund, she assumed Deutsche Bank would follow Institutional Shareholder Services recommendation to vote for the deal.

"I was only spending my time on those who were projected to be against the deal," she said.

The now infamous voice mail to HP CFO Bob Wayman was played in court in which she said that HP might have to do something "extraordinary" to win Deutsche Bank's support. She defined something extraordinary as flying out for a face-to-face meeting or having Compaq CEO Michael Capellas meet personally with Deutsch Bank.

She also denied delaying the start of the March 19 proxy vote until Deutsche Bank switched and said she only learned of Deutsche Bank's vote tally after the meeting had adjourned.

Fiorina continues her testimony Wednesday morning.