Hewlett's report, filed with the Securities and Exchange Commission on behalf of the William R. Hewlett Revocable Trust and its trustees, describes how large computer company mergers have failed in the past to create revenue and cost savings. Instead, they have led to declines in earnings and diminished stockholder value, according to the report, which analyzes such mergers as Compaq's own acquisition of Digital Equipment in 1998 and Tandem Computer in 1997.
The study also looks at Burroughs' merger with Sperry to form Unisys in 1986.
Stockholders of the acquirers in each of these mergers suffered big losses after the transactions, and each company had lower earnings three years later, the report states. For example, Compaq earnings were expected to be $1.77 per share for the fiscal year after its merger with Digital, but Compaq ended up reporting just 15 cents a share three years later and has never returned to its pre-merger earnings level.
"Given that past computer mergers failed during the greatest IT spending boom in history, it is far riskier to attempt a complex global integration during the current severe recession in technology spending," Hewlett stated in a press release.
HP and Compaq shareholders such as Alliance Capital and Putnam Investments reportedly support the deal, and Compaq CEO Michael Capellas on Friday argued that the mergerbecause of the "maturation of the tech sector."
Despite Hewlett's bluster, some on Wall Street have questioned his credibility, arguing that his opposition is based on emotion rather than hard facts.
"The fact is that the PC industry is maturing and (Walter) Hewlett and (David) Packard are hanging on to the collegial vision and romantic attachment to the old HP," said one hedge fund manager who supports the deal. "That is nice, but the tide has shifted."
The European Union is expected to render its decision on the merger. A shareholder vote on what would be the largest merger in personal computer history is expected in March.