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Tech Industry

Walter Hewlett ally takes Fiorina to task

Hewlett-Packard CEO Carly Fiorina takes more flak in her prolonged battle to acquire Compaq. Also: Members of HP's board--sans Hewlett--say they're not distracted by merger plans.

As the proposed merger of Hewlett-Packard and Compaq Computer nears a deciding shareholder vote, an ally of dissident board member Walter Hewlett is taking HP to task for its tactics in promoting the merger.

James Gaither, a director of the William and Flora Hewlett Foundation, sent a letter Monday to HP CEO Carly Fiorina, applauding Walter Hewlett for his vocal opposition to the deal. The Hewlett Foundation and Walter Hewlett, as well as David Packard and two Packard family foundations, have come out against the merger.

"You seek to discredit Walter Hewlett, questioning his right to speak up as a director and shareholder--a strange assertion in light of the recent events at Enron," Gaither wrote in the letter. "A director and shareholder should speak out concerning a matter submitted for shareholder approval if he believes the transaction is not in the best interests of the shareholders, and indeed, that it might jeopardize the future of this great company."

Both sides are gearing up for a March 19 vote of HP's shareholders that is likely to determine the outcome of the $25 billion megamerger.

In his letter, Gaither takes aim at the personal nature of HP's attack on Walter Hewlett.

"Despite Mr. Hewlett's 15 years on the HP board, you suggest that because he is an 'academic and musician,' he should not be taken seriously," Gaither wrote in the letter. "Perhaps you have forgotten that one of the great directors of HP and of the William and Flora Hewlett Foundation, Dr. Condoleezza Rice, is also an 'academic and musician' who now serves with great distinction as National Security Advisor to President Bush."

A source close to HP says that in board meetings on the deal, Walter Hewlett did not bring up the issues he is now raising. The company has pointed out that he missed several board meetings at which the merger was discussed.

The line about being a "musician and academic" came in a sharply worded letter sent last month by HP to its shareholders. The letter also said Walter Hewlett had never worked at the company and encouraged shareholders to consider that his interests might be different from theirs.

In recent days, Fiorina has tried to focus the debate on the merits of the deal.

"Walter is a good and decent man," Fiorina said in a speech at the Goldman Sachs Technology conference last week. "And he has a right to disagree. But we have every right to disagree with him, too."

Walter Hewlett has argued that HP should grow organically rather than through a large acquisition--focusing, in particular, on building its already strong printing business. However, some have questioned whether the company can continue to build its business in that area without investing in related businesses such as PCs and servers.

One key to the outcome will be an upcoming report from Institutional Shareholder Services, a key advisor to many of HP's and Compaq's large shareowners.

HP's not "distracted"
Separately, HP penned a letter to its shareholders Monday, again urging them to vote in favor of the deal.

"We aren't distracted by the merger or the challenge of integration. And our customers aren't defecting," HP's board members--with the exception of Walter Hewlett--wrote in the letter.

Meanwhile, Walter Hewlett filed documents with the Securities and Exchange Commission that characterized as unsatisfactory HP's response to his contention that big mergers in the technology industry don't work.