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Follow UsDear Fellow Hewlett-Packard Stockholder:
Join us in voting against the merger of Hewlett-Packard with Compaq. We are convinced that this is a bad transaction for all HP stockholders.
The William R Hewlett Revocable Trust, like you have a big stake in the future of HP, and we are urging you to vote against this transaction. The William and Flora Hewlett Foundation and the William R Hewlett Revocable Trust, which together own approximately $ 2.4 billion in HP shares, and the David and Lucile Packard Foundation, which owns approximately $ 4.4 billion in HP shares, have already indicated their opposition to the merger.
Do not vote for a bet-the-company transaction.
HP is a strong company. HP is not in crisis. Do not bet the company on the Compaq transaction. It would be a mistake to become the world's largest commodity computing company, more than doubling HP's exposure to the troubled PC business.
That would be a crisis.
Why would you want to invest in Compaq, who's own CEO, Michael Capellas, admits that 45 percent of its revenues are in a 'rotten business?'
Why would you want to invest in a company where 64 percent of its total revenues and 83 percent of its hardware business are in low-end commodity computing?
Why would you want to invest in a business that suffers from overcapacity and is plagued by reduced demand on a global basis?
Why would you want to invest in the combined HP-Compaq company when titrust regulators don't 'expect HP-Compaq to derive any real benefits from this merger, which is why they are approving it?
Why would you want to pay 51.6 times 2002 earnings for a company that mostly sells PCs and low-end servers and is losing money in those businesses?
And why on earth would you pay $25 billion for it?
You wouldn't. And you shouldn't. That is why we urge you to vote AGAINST the proposed transaction and return the
GREEN proxy card.
Neither HP management nor Compaq management has ever successfully integrated a large computing acquisition, let alone a transaction of this size. Why would you trust them when Compaq has lost approximately 60 percent of its shareholder value since its attempt to integrate its $ 9.4 billion acquisition of Digital Equipment Corporation (DEC) in 1998? HP assumes successful execution of the Compaq transaction, believing that they will succeed where others have failed. Why should you bet your company on that?
Wall Street analysts' forecasts, industry precedent transactions and careful analysis of the pro forma economic impact of the merger all reveal the flaws in this proposed transaction. Our analysis confirms that the financial effect of this transaction will be negative for HP stockholders-as the market also clearly signaled when it reacted very negatively to the announcement of the transaction.
The market has made it resoundingly clear that this combination destroys value for stockholders:
HP's stock dropped 18.7 percent when HP announced the proposed Compaq transaction.
HP's stock went up 17.3 percent when we announced our opposition to the proposed Compaq transaction.
HP's stockholders have lost $ 7 billion relative to an index of comparable companies since the proposed Compaq transaction was announced.
Don't vote for this merger unless you want to risk losing a lot more.
HP stockholders have a clear choice: vote to merge with Compaq, struggle to survive the turnaround of the PC business and re-run the failed Compaq/DEC strategy or vote AGAINST the merger and tell the HP board and management to do something a lot smarter.
We are convinced there is a better path-HP was on it when the company spun off Agilent. At that time, the Company noted that it was 'creating two distinct and strategically focused enterprises... able to better focus on growth in their individual markets... (and) well-positioned to build value for their stockholders, customers and employees.'
To stay on that path, HP must:
focus on technology and innovation-not merger integration
focus on imaging and printing-not commodity computing
focus on areas of strength in the enterprise-not commodity computing
focus on fixing problems-not creating them
focus on building good businesses-not acquiring or expanding bad ones
focus on treating employees as assets-not liabilities
focus on stockholder value-not bigger, but better
HP should focus on creating value with its profitable businesses and solving its own problems-not diluting value and taking on Compaq's much bigger problems.
HP has many strengths to build on-a leading position in the very attractive imaging and printing market, a great consumer brand, a strong reputation with enterprise customers and a prodigious source of innovation in HP Labs. HP's results in the fourth quarter, and we expect, its upcoming quarter to be announced on February 13, demonstrate the underlying strength of the company, pointing out the inherent fallacy of a bet-the-company merger with Compaq. Remember that HP had operating cash flow of $ 1.8 billion in the fourth quarter alone.
With hard work, strong leadership and a clear focus on stockholder value, HP can do far better for its stockholders than acquiring Compaq.
This vote is about stockholder value-nothing more, nothing less.
We strongly recommend that you vote AGAINST the proposed transaction and return the GREEN proxy card. The future of HP is in your hands and we believe that future will be best served without the burden of acquiring and integrating Compaq. Your choice is clear.
Thank you for your support,
Very truly yours,
Walter Hewlett