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Tuesday, 19 March, 2002, 21:02 GMT
Close vote on computer merger
The six-month fight over whether Hewlett-Packard should merge with rival computer maker Compaq has drawn to a close, with both sides claiming victory.

Hewlett-Packard shareholders had to vote by Tuesday on whether to agree the $90bn deal, which was proposed by HP chief executive Carly Fiorina on 3 September, but has been fiercely opposed by the family that started the firm.

Hewlett-Packard chief executive Carly Fiorina
Ms Fiorina has staked her career on the merger

Both sides claimed victory in the vote, with Hewlett-Packard saying that it was winning a "decisive majority" of votes for the deal.

"It appears that our shareholders made a choice today, not only to embrace change, but to lead it," Ms. Fiorina said.

But Walter Hewlett, whose family foundation owns 18% of the shares in the company, said he was 'optimistic' that the merger would be rejected, and it was "too close to call." He called it a victory for shareholder power.

However, although voting has closed, it could take weeks to count all the votes among the company's 900,000 shareholders who hold some 1.9bn shares.

Compaq shareholders will vote on Wednesday on the deal. Observers expect a clear 'yes' vote, as the merger terms appear to favour Compaq's owners.

Compaq chief executive Michael Capellas.welcomed HP's claim.

"Over the past several months, there has been a groundswell of support from customers, partners and shareholders who are favorable toward the merger," he said.

The real battle

Ms Fiorina and Mr Hewlett clashed at a special shareholders' meeting in Cupertino, California, in the heart of California's Silicon Valley, called to discuss the deal.

Carly Fiorina told shareholders that the deal represented "the single best opportunity for leadership, for growth" in the technology sector.

But Mr Hewlett said that "HP was not a company in crisis" and the company was not a relic of another time which needed to merge.

Some 2,000 shareholders gathered for the meeting, some of them dressed in green to indicate that they would cast green "no" ballots against the deal.

"This is about empire-building, not making HP stronger," said one shareholder, Keith Butler, a retired HP employee.

But the real battle will be with the institutional shareholders like banks and pension funds, who hold the bulk of outstanding shares.

If shareholders reject the merger, Ms Fiorina is expected to resign as chief executive.

Big deal

The merger would be one of the largest ever attempted in the computer industry.

It would create a computer giant that would rival IBM, a long-stated goal of Ms Fiorina.

Dave Packard (left) and Bill Hewlett of Hewlett-Packard fame
Dave Packard and Bill Hewlett started H-P in a garage

But critics charge that Hewlett-Packard, the oldest high-tech firm in Silicon Valley, would lose its character in the merger, and dilute its high-value imaging business by merging with a loss-making computer manufacturer.

Compaq, and rivals like Gateway, have suffered in the highly competitive computer market with profits and sales down sharply this year. Only its long-time rival Dell has managed to keep to its performance targets.

The merger could also lead to up to 15,000 job losses, although Hewlett-Packard has refused to be drawn on where they might come from.

Voting delays

Although voting officially closed at the end of the special shareholder meeting on Tuesday, there is an elaborate process for counting the results.

A quick view of the outcome will be provided by Automatic Data, a New Jersey company, who will tally 80% of the initial results.

But the ballots will then be reviewed and counted by hand by IVS associates - and each side can make an appeal for a recount or challenge disputed votes.

One observer said it could be like a rerun of the disputed US presidential election in Florida if the count proves really close.

The BBC's Andrew Walker
"Hewlett-Packard would be the dominate partner although the deal is formally a merger"
The BBC's Patrick O'Connell
"The margin between both sides is slim"
See also:

14 Nov 01 | Business
Hewlett-Packard battles for Compaq
25 Jan 02 | Business
Compaq raises profits outlook
05 Sep 01 | Business
Jobs slashed in biggest PC merger
06 Sep 01 | Business
Tough sell for PC giants merger
04 Sep 01 | Business
Profile: HP's Carly Fiorina
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