From today's NY Times:

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April 18, 2002

Hewlett's Chief Says Count Confirms Victory

By STEVE LOHR

Hewlett-Packard said yesterday that a count by independent inspectors had
confirmed that it won the shareholder vote in the fierce proxy battle over
the company's future by a modest but decisive margin.

The vote can be challenged, and Walter B. Hewlett, who led the proxy battle
opposing Hewlett-Packard's planned purchase of Compaq Computer, promised
yesterday that he would do so. Mr. Hewlett's representatives will insist on a
recount of some or all of the votes, a spokesman said.

Mr. Hewlett has also gone to court to try to stop the deal, suing the company
in Delaware, where a three-day trial is to begin next Tuesday. The
accusations in the suit have also prompted inquiries from the Securities and
Exchange Commission and the United States attorney's office for the Southern
District of New York.

But the vote count, by IVS Associates of Newark, Del., brings the largest
merger in computing industry history a crucial step closer to completion. The
tally -- deemed preliminary until all recounts are completed -- gave
Hewlett-Packard a margin of victory of 45 million votes, or about 2.8 percent
of the more than 1.6 billion shareholder votes cast.

On the day of the vote, March 19, Hewlett's chief executive, Carleton S.
Fiorina, said the company had won by a "slim but sufficient" margin.

The apparent margin of victory is intriguing, given the suit Mr. Hewlett has
filed in a Court of Chancery in Wilmington. In the suit, he asserted that the
company had strong-armed a large institutional shareholder, Deutsche Bank, to
switch 17 million shares to vote in favor of the Compaq deal.
Hewlett-Packard, according to the suit, threatened to deny future banking
business to Deutsche Bank unless it sided with the company.

With a 45 million vote margin, the opponents of the deal, led by Mr. Hewlett,
would not have won even if the 17 million votes were subtracted from the
company's total and added to the opposition -- a swing of 34 million.

Yet such arithmetic, while intriguing, may not matter much, depending on what
the chancellor, William B. Chandler III, decides at the Delaware hearing. The
suit is being heard in Delaware because Hewlett-Packard, like many companies,
is incorporated there.

Judge Chandler has several options, should he rule in favor of Mr. Hewlett.
He could throw out just the Deutsche Bank votes or the votes of certain other
institutional shareholders, or he could find that the integrity of the proxy
vote itself had been put in doubt and order a revote, according to Charles
Elson, director of the Center for Corporate Governance at the University of
Delaware.

"This vote was still very close," Mr. Elson observed. "This only makes the
case before Judge Chandler more interesting."

The inspectors' tally showed about 51 percent of the share votes, or 837.9
million, in favor of the Compaq merger. The votes against it totaled 792.6
million, or more than 48 percent. A small percentage of the votes cast, a
million or so, are unresolved.

The Hewlett and Packard heirs and their family foundations hold about 18
percent of the company's shares, and they voted against the merger. In its
press release, Hewlett-Packard said that its margin of victory excluding the
founding-family holdings was considerable, by roughly 2 to 1.

In an e-mail message to company employees, Ms. Fiorina wrote, "These results
confirm what we've known all along -- the majority of shareowners who are not
affiliated with the Hewlett and Packard families or their foundations believe
this merger represents the best path forward for our company."

The Hewlett-Packard board and Ms. Fiorina insisted that by merging with
Compaq, Hewlett would be stronger and better able to prosper in the
increasingly competitive information technology business. Mr. Hewlett and his
supporters argued that the price for Compaq -- $25 billion in stock when the
deal was announced last fall -- was exorbitant and that becoming bigger would
not make Hewlett-Packard stronger.

In her e-mail message, Ms. Fiorina said Mr. Hewlett's demand for a recount
and a possible challenge to the final tally would probably take less than two
weeks. Hewlett-Packard, she said, expects the merger to close and the new
company to begin operating early in May.

Just as investors were sharply divided over the wisdom of the Compaq merger,
there were divisions inside Hewlett-Packard. In her e-mail message, Ms.
Fiorina noted that an employee had been fired for leaking company memos -- "a
violation," she said, "of both company policy and the trust of longtime
colleagues."

One memo was from the head of Hewlett-Packard's services business. It said
that the turmoil surrounding the Compaq merger had caused people to lose
focus and miss opportunities. Later, the executive, Ann Livermore, issued a
statement saying that the memo was merely a routine communication, urging her
staff to redouble their efforts to reach quarterly sales targets.

In addition, a voice mail message from Ms. Fiorina to Robert Wayman, the
chief financial officer, was leaked. In the message, just before the
shareholder vote on March 19, Ms. Fiorina said the company might have to do
"something extraordinary" to win the support of Deutsche Bank and another
institutional shareholder, Northern Trust.

In her message to employees, Ms. Fiorina said, "We have concluded that the
voice mail was not obtained or forwarded from within the H.-P. voice mail
infrastructure."

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