duane retorts on the issue context-sensitive quoting:

> No. Bill has it wrong.
>
>  Yes. Those reports were all the same as the SF Chronicle, which
>  also included this narrative in the same article:
>
>  In a statement, S&P also noted that even without the merger,
>  HP's credit rating would have been lowered because of its
>  "weaker profitability levels and diminished earnings."
>
>  I stand by my previous post. Evidently, there was more to report and
>  it was either not all reported or not all referenced. Since Bill didn't
>  state his source you will have to ask him.

No. Bill has it right. HP's credit downgrade was based partially on the
prospect of the merger occurring, as Bill wrote. Of course, all of the
reported quotes are second-hand. Mark Wonsil was kind enough to email me
Standard & Poor's original text, which is the gold standard in this case. No
one should know better than Standard & Poor's as to what they meant and why
they did what they did:

========================================

"Standard & Poor's on March 7, 2002, lowered its corporate credit and senior
debt ratings as well as its commercial paper rating on Palo Alto,
Calif.-based Hewlett-Packard Co. The downgrade reflects Standard & Poor's
view of HP's business and financial risk profile pro-forma for the
completion of the merger with Compaq Computer Corp.

Ratings on Compaq Computer Corp. remained on CreditWatch with developing
implications, where they were placed Dec. 13, 2001. CreditWatch developing
indicates that ratings could be revised upward or downward.

Standard & Poor's recognizes the strategic validity of the merger, the
improved market position of the combined company, and HP's strong financial
profile for the rating. However, these positive factors are offset by the
heightened level of operational and strategic execution risk inherent in a
merger of this size in the highly competitive and rapidly evolving
technology market. Even if the merger with Compaq had not been announced,
HP's ratings would have been lowered to a comparable level. HP's weaker
profitability levels and diminished earnings predictability reflect the
impact of its computer hardware segments, which are currently unprofitable
and operate in extremely challenging and competitive environments. While the
merger offers the scale and market positions in hardware that could lead to
greatly improved profitability, the execution risks are significant.

The HP ratings remain on CreditWatch with negative implications due to the
still-uncertain outcome of the shareholder vote. If the merger is completed,
HP's ratings will be affirmed with a negative outlook, reflecting Standard &
Poor's concern about integration and business disruption risks. Compaq's
ratings will be reviewed for upgrade reflecting its acquisition by a
stronger credit.

If the merger is not completed, Compaq's and HP's ratings will be on
CreditWatch with negative implications. Standard & Poor's will meet with
management of both companies to assess their financial policies and
strategies as independent companies, which could potentially entail
significant changes from those incorporated in the existing ratings. "

========================================

Wirt Atmar

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