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HP-Compaq rift widens
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December 13, 2001: 2:14 p.m. ET
War of words escalates amid board, family dispute over merger plan.
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NEW YORK (CNN/Money) - The controversy surrounding the proposed merger of Hewlett-Packard and Compaq intensified Thursday as opponents and supporters of the deal locked horns.
In a letter dated Sept. 12 and made public by the Securities and Exchange Commission Thursday, Walter Hewlett, the son of one of HP's co-founders, told the boards of directors of both companies that there is "enormous unhappiness" about the deal among shareholders and warned of a "very high probability" it would be defeated should it come to a vote.
Hewlett, who has vowed to launch a proxy fight against the proposed deal, is one of a growing number of HP shareholders that have come out against it.
Last week, the board of the David and Lucille Packard Foundation, which holds nearly 10 percent of HP's stock, said it made a preliminary decision to vote its shares against the deal. The Packard foundation is headed by Susan Packard Orr, one of the daughters of company co-founder Dave Packard.
David Woodley Packard, the son of HP's co-founder, said the Packard Humanities Institute, of which he is chairman and which owns 25 million HP shares, or 1 percent of the company, also likely will vote against the transaction when it is put to the shareholders.
Together, the opponents of the deal hold roughly 18 percent of the stock.
Their opposition to the deal stems largely from concerns that it would increase HP's exposure to the flagging PC industry; increase its exposure to the low-end server business; and jeopardize its strong position in the printing and imaging business.
The risk involved in combining the assets of the two expansive companies also has raised some red flags from shareholders and analysts.
In his letter to the companies' boards, Hewlett urged "a speedy, mutual unwinding of this transaction."
Executives of both HP and Compaq have vowed to press on with the deal, which still needs regulatory approval before it can be taken to shareholders for a vote.
Richard A. Hackborn, who is a member of HP's board as well as the board of the Hewlett Foundation, a philanthropic organization headed by Walter Hewlett, took that a step further Thursday.
Saying that the merger plan would "ensure vibrant healthy businesses and therefore protect jobs," Hackborn resigned from the Hewlett Foundation's board.
"I have seen no plan from the heirs," Hackborn said Thursday.
"Their opposition does not address any of the issues or opportunities of this company," Hackborn added. "Our plan secures HP's future. Standing still does not serve shareowners or employees. Therefore, in good conscience, I believe I can no longer serve on both boards."
A date for a shareholder vote on the proposed merger has not been set. 
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