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HP counters Hewlett claims
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February 11, 2002: 7:13 p.m. ET
HP co-founder's son offers alternate vision of a Compaq-free future.
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NEW YORK (CNN/Money) - Hewlett-Packard Co. lashed back Monday against dissident Walter Hewlett, claiming that the company's board has considered, debated, and rejected every alternative Hewlett now suggests.
Palo Alto, Calif.-based Hewlett Packard (HWP: up $0.45 to $20.85, Research, Estimates), nearing its March 19 shareholder vote on a $25 billion takeover of Compaq Corp., said it has already outsourced its PC manufacturing business and that Hewlett's suggestion shows the absence of a real plan on his part.
"Mr. Hewlett does not understand the linkages between our businesses and the importance of profitability, growth and market leadership in the industry," HP's board of directors said in a letter to shareholders.
Walter Hewlett, son of Hewlett-Packard Co. co-founder William Hewlett, has launched a proxy fight against the combination, claiming that large computing mergers consistently fail.
Hewlett has long failed to offer an alternative to the HP-Compaq merger but detailed his vision for HP's future Monday. Hewlett said that his plan for HP includes scaling back its personal computer operations and replacing CEO Carly Fiorina, according to the Wall Street Journal.
Hewlett told the paper that he would like to see HP focus on its more profitable printing and imaging business, expand its services business -- including possibly buying smaller companies in the software and consulting industry -- and cut back on its personal computer operations.
"What HP needs is focus, not breadth," Hewlett told the Journal.
Hewlett, a member of HP's board, also told the WSJ that he expected Fiorina to step down if the Compaq (CPQ: down $0.05 to $11.54, Research, Estimates) merger fails.
The paper said Hewlett wouldn't dismiss the idea of buying businesses such as PricewaterhouseCoopers' consulting unit, an acquisition HP considered and then abandoned more than a year ago after credit agencies and shareholders reacted negatively to the idea.
Hewlett also charged late Monday that the HP-Compaq merger did not result after two-and-a-half years of careful evaluation. Rather, the deal was the consequence of a phone call from Compaq CEO Michael Capellas to Fiorina just a few months before the deal was announced in September 2001.
"The cornerstone of our alternative strategy for HP is that the company should focus on its strengths and build on its good businesses," Hewlett said. "One of our alternatives is that HP should be strengthening its lead in imaging and printing."
Separately, James Gaither, a director of the Hewlett Foundation, defended Walter Hewlett attempts to dislodge HP's $25 billion takeover of Compaq Corp.
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In a letter to HP Chairwoman and CEO Carly Fiorina, Gaither said the computer maker had made its attacks against Hewlett and the Foundation personal.
"You seek to discredit Walter Hewlett, questioning his right to speak up as director and shareholder -- a strange assertion in light of the recent events at Enron," Gaither said.
HP has characterized Hewlett as a "musician and academic" and should not be taken seriously. Gaither pointed to Dr. Condoleeza Rice, a director of HP and of the William and Flora Hewlett Foundation, who is also a musician and academic and is now National Security Advisor to President Bush.
Gaither also countered claims by HP that chaos would reign if shareholders did not vote for the merger. If HP were to fail in its takeover of Compaq, Fiorina would likely step down, which would result in part of the turmoil.
If Fiorina were to leave, HP's board would move to quickly establish a strong management team and assess the company's strategic alternatives, Gaither said. 
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