HP-Compaq opposition gathers strength

Opposition to the HP-Compaq merger is growing stronger following analyst support for Walter Hewlett's alternative to the deal.

A Wall Street analyst said she agreed with many of the proposals made by the HP board member and son of the founder, including a possible spin off of the company's printing and imaging division within 12 to 18 months.

Walter Hewlett said the proposals outlined in his 16-page "focus and execute" strategy would add $14 to $17 a share as opposed to the $5 to $9 per share proposed by HP CEO Carly Fiorina.

Hewlett's scheme is based on three key principles: boosting imaging and printing, build market share in the mid- to high-end enterprise computing arena and focusing on profit, not market, domination in the PC market.

He also argued the company should consider pulling out of the corporate PC market to focus on its profit-making consumer PC business.

Analyst Kimberly Alexy said the HP board had considered spinning off the lucrative printing and imaging business at the same time it spun off its test and measurement division to become Agilent in 1999.

According to US wires, Alexy said HP faced a threat in a post-merger landscape as the depressed PC business diluted the value of the printing division.

She also agreed with Hewlett's claim that the merger would dilute the value of HP shares and return less costs savings than official figures suggest.

In a further blow to supporters of the $22bn merger, another family dissident, David W. Packard, claimed that HP workers in the company's Oregan operation opposed the merger by around two to one.

Packard commissioned an independent survey of 445 employees which found that 38 per cent "strongly opposed" and 25 per cent "somewhat opposed" the deal.

Shareholders are due to vote on the merger on 19 March.