HP explains Hewlett ouster to employees

In a letter to employees, HP's board said it had planned to renominate Hewlett despite his opposition to the Compaq Computer merger, but changed its mind after Hewlett filed suit last week seeking to overturn HP's shareholder vote.

The decision to remove from the board the lone representative of the Hewlett and Packard families drew criticism Monday as analysts and others said it could further drive a wedge between company management and employees and shareholders who oppose the merger.

HP has claimed a narrow but decisive victory in the shareholder vote, while Hewlett has maintained it is too close to call. An independent tally is still up to a few weeks away.

Tuesday's letter says HP board members met with Hewlett a day before the lawsuit, and he raised none of the issues addressed in the suit. Board members were therefore "shocked" at his legal action the next day.

Hewlett's lawsuit, filed last week in Delaware Chancery Court, alleges that HP improperly influenced Deutsche Asset Management, a large shareholder, to change its votes on the morning of the March 19 vote. Hewlett also contends that the integration process had been faltering, and that HP failed to disclose that information to shareholders.

On Monday, HP asked a Delaware judge to throw out Hewlett's lawsuit, calling it "a last-gasp attempt by the apparent loser of a proxy battle to gain in the court what he apparently could not win at the ballot box."

The judge in the case, Chancellor William B. Chandler III, has set a hearing for Sunday morning to consider arguments on HP's motion.

In Tuesday's letter, HP characterized the allegations in the suit as "completely baseless."

"In essence, Mr. Hewlett continues to allege--now in the courts--that the board and management team are systematically deceiving shareowners," the board members wrote. "We will not stand by and let this go unchallenged."

HP urged employees to focus on the results of the vote, not on Hewlett's lawsuit.

"It's time we let the votes be counted and whoever gets more votes wins," HP's board said in the memo. "That's what real corporate democracy is all about."

Hewlett, who has been on HP's board for 15 years, has come under fire from the company his father co-founded. HP has labeled him a "musician and academic" unqualified to decide the company's future.

In addition to soliciting proxies in an effort to derail the proposed $20 billion merger, Hewlett has irked HP by releasing details of board discussions on salary negotiations with HP CEO Carly Fiorina and Compaq CEO Michael Capellas.

Hewlett, along with other members of the Hewlett and Packard families, controls roughly 18 percent of HP shares.