HP called Compaq's chief financial officer as its first witness as it launched its defense against a lawsuit's claims that the companies misled shareholders by touting knowingly inaccurate financial projections.
WILMINGTON, Del. -- Hewlett-Packard Co. called Compaq Computer Corp.s chief financial officer as its first witness as it launched its defense against a lawsuits claims that the companies misled shareholders by touting knowingly inaccurate financial projections.
Jeffrey Clarke, a co-leader of the HP-Compaq integration teams, testified that the financial benefits from the merger the companies have been touting "are not only attainable, but will probably be exceeded."
The executive downplayed differences between assessments sent shareholders vs. apparently conflicting and less optimistic assessments made in internal reports cited by attorneys for plaintiff Walter Hewlett, whos suing to block HPs $19 billion takeover of Compaq.
Clarke said the integration team that issued the conflicting reports didnt have access to all the information that HP executives considered when making its projections, thus resulting in differing assessments of potential integration costs and savings.
In cross-examining the executive, Hewletts attorneys revealed a March memo Clarke sent to Compaq Chairman Michael Capellas that stated, "It is ugly. Both companies are deteriorating."
Clarke testified that the note merely reflected how he was upset at the time with some executives for failing to fully address financial goals he had set.
"I was frustrated at the work being done by HPs executive committees and that targets we had set were not being embraced by business groups," he said.
Those issues were eventually resolved, Clarke said, and he said he never doubted that the buyout was in the best interests of both companies and their shareholders.
Hewletts suit filed in Delaware Chancery Court contends HP lobbied shareholders to vote in favor of the buyout by using optimistic financial projections that ran counter to information. In addition, Hewlett charged that HP illegally pressured Deutsche Bank
to get the financial institutions investment arm to vote 16 million shares in favor of the buyout.
In seeking to validate that assertion, Hewletts attorneys recalled HP Chairman Carly Fiorina
to the stand this morning to question her about a meeting she had with Deutsche executives.
According to a transcript of the meeting, Fiorina told Deutsche executives that the buyout vote was "of great importance to our ongoing relationship."
But when asked on the stand if that comment implied the financial institution was at a risk of losing HPs business if it didnt support the buyout, Fiorina testified, "Absolutely not."
Testimony is expected to continue through tomorrow. At that point, the case will rest in the hands of Judge William B. Chandler III, who could overturn HPs March 19 shareholder vote that gave the computer maker the needed approval to proceed with the buyout.