WILMINGTON, Del.—Hewlett-Packard Co. and Compaq Computer are ready to launch their combined company May 7—if their proposed deal is approved—according to HP Chairman and CEO Carly Fiorina.
The product road map is set, the marketing strategy is prepared and the companies Web sites are ready to be merged into one, Fiorina said Tuesday afternoon. The only thing theyre waiting on in the outcome of the current court case here.
Fiorinas statements came during more than five hours of testimony at the trial concerning the lawsuit filed last month by HP board member Walter Hewlett, who is asking Judge William Chandler III of the Delaware Chancery Court to toss out the results of the March 19 shareholder vote and quash the proposed $20 million deal.
Hewlett claims that HP executives mislead shareholders by not fully disclosing to them the risks of HPs acquisition of Compaq, and that the Palo Alto, Calif., company improperly pressured institutional shareholder Deutsche Bank and its subsidiary, Deutsche Asset Management, to vote for the deal.
Hewlett attorney Stephen Neal spent much of the morning and some of the afternoon session pressing Fiorina on reports from groups involved in the integration efforts of the two companies that seemed to contradict financial predictions touted by Fiorina and other HP and Compaq executives about the benefits of the buyout.
However, Fiorina argued that the reports from the Value Capture Teams, which were created to gauge the progress of groups integrating the companies various business units, were only snapshots rather than forecasts and did not take into account other information that executives were using when speaking with analysts and the media.
During questioning by HP attorney Boris Feldman, Fiorina outlined the complex process of integration two such large companies, and said that despite the Value Capture Reports, numbers they were using were actually conservative.
For example, HP executives have said they expect to see savings of $2 billion in savings in fiscal year 2003 by merging the companies, but that that number could jump to more than $3 billion given the numbers that are being generated by the integration team, Fiorina said.
Also, the companies will be able to reach their post-acquisition numbers, including operating margins of 8 to 10 percent, she said. She also expects to cut 13,000 to 15,000 positions, just over half of what Hewlett has contended will be cut.
Fiorina said it would have made no sense to release those Value Capture Reports to shareholders or board members.
“If all you saw of a movie is a still photo, that would provide a very misleading view of whats going on,” she said.
She also said that the sooner the buyout is completed, the less revenue loss the new company will take due to the acquisition. Customers have been anxious for answers as to what product lines will survive and which will die off, and HP executives cannot make public their road map until the deal is finalized. They expect to be able to do that May 7.
“This is a maximum time of uncertainty [for customers] and a maximum time of opportunity for our competitors,” Fiorina said.
She also denied using that she or any other HP executive used improper pressure to get Deutsche Asset Management to switch its votes in favor of the deal. When asked by Feldman what she meant when she said on a voice mail to HP Chief Financial Officer Bob Wayman that “extraordinary” means may be needed to swing the votes from Deutsche Asset Management and another institutional investor, Northern Trust, to support the deal, Fiorina said she wasnt sure.
“I was trying to convey a sense of urgency,” she said. “This was new and significant news. I knew we could not leave it that we never had the opportunity to present our case.”
HP executives spoke with officials from both Deutsche Asset Management and Deutsche Bank the morning of the March 19 shareholder vote. The asset management group eventually voted its 17 million shares for the deal.
Though he claims the influence was improper, Hewlett will need more than those 17 million votes thrown out to kill the deal. HP executives last week said a preliminary count of the votes showed that the deal passed by about 45 million votes.
Fiorina is expected to wrap up her testimony Wednesday morning. Also waiting to testify is Wayman. The trial is expected to last until Thursday.