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Walter Hewlett grills Carly Fiorina

Hewlett-Packard CEO Carly Fiorina took the witness stand yesterday (Tuesday) in Walter Hewlett’s attempt to block the company’s $19 billion acquisition of Compaq.

Hewlett-Packard CEO Carly Fiorina took the witness stand yesterday (Tuesday) in a case bought by Walter Hewlett that attempts to block the company’s $19 billion acquisition of Compaq Computer.

Hewlett’s attorneys asked Fiorina about reports that ‘value capture’ teams from HP and Compaq have questioned key financial projections about the merger's impact.

"There are a lot of people involved and a lot of back and forth," Fiorina responded from the stand. "The value capture reports are not a full picture of what we could and should achieve."

When Hewlett attorney Stephen Neal asked why HP didn't disclose the reports from the value capture team to its board and to shareholders, Fiorina replied that it would have been irresponsible to do so since the reports are just a snapshot and not a full picture of the company's targets.

Fiorina said the value capture reports illustrate the dynamics of planning the integration. A larger number of managers were brought into the planning process, skewing early projections.
"Gaps emerge and gaps are closed," she said. "There's also a human dynamic to this; they want numbers they can knock out of the ballpark."

Value capture is a key pillar of HP’s recommendation for the merger. Fiorina has consistently stated that the merger will bring about $2.5 billion in cost savings.

Attacking this value capture process is one of two issues raised by Hewlett in his lawsuit, which seeks to throw out a March 19 shareholder vote that HP claimed gave it the slim majority needed to complete the merger.

In addition to questioning HP's disclosure about the financial projections, Hewlett contends that HP essentially bought the vote of Deutsche Bank, a large shareholder that had initially opposed the deal.

Fiorina defended the Deutsche Bank negotiations, calling them not unusual.

Fiorina said the measures that she mentioned in a leaked voicemail to Chief Financial Officer Bob Wayman referred to such things as visiting Deutsche Bank for a face-to-face meeting, recruiting an HP board member to talk with the bank, or getting Compaq involved.
In the voicemail, which was leaked to the San Jose Mercury News earlier this month, Fiorina tells Wayman that she is nervous about how Deutsche Bank and Northern Trust were going to vote and says HP might "have to do something extraordinary for those two to bring them over the line."

"By 'extraordinary,' I was trying to convey a sense of urgency," Fiorina said. "We couldn't simply leave it."

The case continues.

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