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H-P director fights buyout

Hewlett-Packard Co director Walter Hewlett, son of a company co-founder, has hired a proxy-solicitation firm as he opposes the second-biggest computer maker's planned US$20.5 billion purchase of Compaq Computer Corp.

Hewlett family members and the William Hewlett Revocable Trust said Tuesday they will vote their 5 percent stake against the deal. Today, Walter Hewlett's spokeswoman Joele Frank said he hired proxy solicitor MacKenzie Partners Inc.

A move like this typically signals the start of a proxy battle to control the direction of a company, and investors said it's likely that Walter Hewlett -- who previously said he hadn't decided how strongly to fight the acquisition -- is about to go on the offensive to try to lure other shareholders to his side.

"He's going to go to war," Patrick Adams, a fund manager at Choice Investment Management, which owns shares of Compaq. "He could make a strong case that H-P is better off not having Compaq."

Walter Hewlett hasn't decided whether to start asking for proxies against the purchase, though he wanted to keep the option open, Frank said.

"He knows what his options are, and should he decide a course of action, he has the team to execute it," she said.

He also has hired the San Francisco law firm of Cooley Godward LLP and San Francisco private equity firm Friedman Fleischer & Lowe to provide financial advice, Frank said.

Hewlett-Packard shares rose US$0.64 to US$18.99. They've fallen 55 percent in the past year. Compaq fell US$0.26 to US$7.73 and has dropped 71 percent in the same period.

MacKenzie, based in New York, earlier this year helped Computer Associates International Inc. successfully fend off a bid by Dallas billionaire Sam Wyly to gain a voice on the fifth-largest software maker's board and push for internal reforms.

"It looks like he's becoming more active," said Sunil Reddy, a fund manager whose Fifth Third Bancorp owns 1.1 million shares, referring to Walter Hewlett. "The chances of the deal going through are less than 50-50."

Walter Hewlett, his sisters Eleanor Hewlett Gimon and Mary Hewlett Jaffe, the William Hewlett Revocable Trust and the William and Flora Hewlett foundation own more than 100 million shares of Palo Alto, California-based Hewlett-Packard. Family members have complained that acquiring Compaq would boost the company's position in the personal-computer market, a business where profit margins are shrinking and annual sales are forecast to fall for the first time in more than 15 years.

"This is a bad transaction," Walter Hewlett, son of William Hewlett, said on Tuesday. "The sooner it ends, the better."

David Packard, a former board member whose Packard Humanities Institute owns more than 25 million shares of the company, has said he supports Walter Hewlett's view and will vote against the deal.
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