http://www.nytimes.com/2002/03/21/technology/21HEWL.html?todaysheadlines
March 21, 2002

Compaq Shareholders Approve Sale to Hewlett-Packard

By CHRIS GAITHER and STEVE LOHR

    Compaq Computer (news/quote) said yesterday that its shareholders had
overwhelmingly
     approved its $24 billion purchase by Hewlett-Packard (news/quote), a
day after Hewlett's
managers declared a narrow victory in the hotly contested proxy battle.

The vote by Compaq's shareholders, held in Houston, where Compaq is based,
lacked the
suspense and theatrics of Hewlett-Packard's shareholders meeting on Tuesday
in California.
Compaq received a premium for its shares and faced no public challenges to
the merger, unlike
Hewlett-Packard, one of whose directors, Walter B. Hewlett, had lobbied
fiercely against the deal.

Carleton S. Fiorina, the chairwoman and chief executive of Hewlett-Packard,
declared on Tuesday
that an unofficial count showed a "slim but sufficient" margin of victory.
With an official count not
expected for several weeks, Mr. Hewlett contested her claim, calling the
results far too close to call.

A late swing among major institutional investors toward Hewlett- Packard was
the basis for the
company's declaration that it had won the proxy contest. Indeed, by the
close of the shareholders'
meeting on Tuesday, 9 of the 12 largest shareholders had voted for the
merger, according to
advisers to both sides in the proxy contest.

For Hewlett-Packard, the performance among the big shareholders was
particularly impressive
because two of its largest shareholders were the Packard and Hewlett family
foundations, which
had declared last year that they opposed Compaq merger.

Some institutional investors did not totally side with the company, but the
support was apparently
emphatic enough to give it the edge. For example, Capital Research and
Management, the largest
shareholder after the David and Lucile Packard Foundation, held more than 69
million shares, or
3.58 percent.

Capital Research voted roughly 66 million shares for the merger, and 3
million against it, according
to a person who had seen the institutional vote tally. There were
last-minute vote switchers among
large institutions. Deutsche Asset Management, an investment arm of Deutsche
Bank (news/quote),
cast its 17 million shares for the merger as the shareholders' meeting was
under way.

Some smaller institutions also switched to side with Mr. Hewlett's camp. But
the net gain on
Tuesday for the management position was about 15 million shares, according
to a person close to
Hewlett-Packard.

In contrast, investors in Compaq saw clear benefits from the deal, and more
than 90 percent of the
shareholders who cast ballots were for it, said Michael D. Capellas, the
chief executive of Compaq.

Though Compaq said it had won 9 of 10 votes cast, its final tally will not
be as lopsided. While
Hewlett-Packard requires a simple majority of votes cast to approve the
deal, Compaq required a
majority of all possible votes. Thirty-two percent of shareholders failed to
cast their ballots and will
be counted as votes against the deal, bringing the final margin of victory
closer to 60 percent.

Compaq stock fell 32 cents yesterday, to $10.82, in a generally down market;
Hewlett-Packard fell
60 cents, to $18.20.

If the Hewlett-Packard results hold up, the deal will bring together a
storied Silicon Valley company
founded 64 years ago and a Texas computer upstart that last month celebrated
its 20th birthday.
The combined company, Ms. Fiorina and Mr. Capellas have said, will offer
corporate customers a
more complete range of hardware, software and computer services, allowing it
to compete better
with full-service vendors like I.B.M. (news/quote)

Others put the situation more bluntly. "What I think this means for Compaq
is an opportunity to
survive," said H. Albert Napier, a professor of management and information
technology at Rice
University in Houston. He added, "I don't think they had any choice."

Last year was among the toughest in Compaq's history. It lost its No. 1
position in personal
computers to Dell, laid off 9,500 employees and had a $765 million loss.
Hewlett-Packard has cut
6,000 jobs and faces its own competitive troubles, but its flagship printer
business helped it remain
profitable during the economic downturn.

Led by Mr. Hewlett, opponents of the deal complained of the high price paid
for Compaq and said
the merger would result in a bloated merger of two mediocre companies that
would be difficult to
integrate. For some Compaq employees, the acquisition revives lingering
bitterness from one of
Compaq's own mergers, the $9.6 billion purchase of Digital Equipment in
1998.

"The integration still hasn't finished," said Derek Lee, a Compaq employee
and union member who
protested outside Hewlett-Packard's meeting on Tuesday. "At some sites, the
Digital people do not
talk to Compaq people. What's it going to be like at H.P.?"

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