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Wednesday, 20 March, 2002, 21:48 GMT
Compaq votes in favour of merger
Compaq and HP logos
Compaq's shareholders have voted in favour of a $20bn merger with Hewlett Packard (HP).

But the positive vote - which was widely expected - only goes half way in clearing the way for the largest ever merger between personal computer makers.


I am gratified that Compaq shareholders have seen the power behind the merger of these two great technology companies

Michael Capellas
Compaq chief
In sharp contrast to Compaq enthusiasm for the tie-up, Hewlett Packard shareholders - including the company's founding families - have bitterly opposed the deal.

Whether the deal goes through rests on the result of the HP shareholder vote, with the official count not due for weeks.

HP claims its shareholders have approved the merger with a 0.5% margin, but has also admitted that the official count could end in the deal's collapse.

Moving on

"I am gratified that Compaq shareholders have seen the power behind the merger of these two great technology companies and given the Board of Directors and management their resounding support," said Michael Capellas, Compaq chairman and chief executive officer.

"At the end of the day, this merger is about market leadership...We are ready to move forward," he said.

HP chief executive Carly Fiorina
Carly Fiorina was greeted by boos
The shareholders meeting was sparsely attended, unlike Tuesday's HP meeting in Silicon Valley.

"We think we have a slim but sufficient margin, and we think it's important to let people know that," said HP's chief Carly Fiorina who was greeted by boos from shareholders.

Walter Hewlett, eldest son of now-deceased William Hewlett, led the opposition to the merger.

Two issues are clouding the enthusiasm of HP shareholders for the deal.

The first is whether HP would be able maintain day-to-day operations without being distracted by the merger, while the second is when the PC market will recover.

Overvalued?

The management of both HP and Compaq say the deal is essential for their survival in the personal computer industry, where demand is slack.

Compaq shareholders have welcomed the deal since HP is considered to be paying an attractive premium.

The belief that HP is overpaying for Compaq has added fuel to the argument against the deal.

Shares in both parties declined on Wednesday, amid wider gloom for technology shares.

Compaq stock lost 2.9% to $10.8, while HP shares fell 3.2% to $18.2.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Elliot Gotkine
"There have been doubts the deal would ever get off the ground"
See also:

18 Mar 02 | Business
HP and Compaq set for final showdown
20 Mar 02 | Business
Shareholders hail 'historic' vote
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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