This article from NYTimes.com has been sent to you by [log in to unmask] Hewlett and Compaq Shares Diverge Ahead of Key Report March 5, 2002 By REUTERS Filed at 11:08 a.m. ET NEW YORK (Reuters) - Hewlett-Packard Co. (news/quote) (HWP.N) shares rose on Tuesday even as merger target Compaq Computer Corp. (news/quote) (CPQ.N) shares fell, indicating investors are less confident the $22 billion merger will go through ahead of advice from an influential proxy monitoring group on the vote. Institutional Shareholder Services, based in Bethesda, Maryland, advises about 700 funds how to vote in proxy battles and on Tuesday after the market closes will weigh in as to whether or not it supports the merger. HP has said that about 23 percent of its institutional shareholders subscribe to ISS and may or may not follow its advice, while other investors are also expected to take their cue from ISS. Analysts say it could be enough to scuttle the merger if ISS advises against the deal, or to push it through if ISS approves of the pact. Sanford C. Bernstein analyst Toni Sacconaghi said in a recent research note that the current likelihood of the deal going through is 35 percent. ``We believe that these odds drop to about 10 percent if ISS votes against the deal and improve to 50 percent or more if ISS votes for the deal,'' Sacconaghi wrote. Hewlett-Packard announced on Sept. 3 plans to buy Compaq, but in the past six months the deal has hit many rough patches as investors questioned its merits and Walter Hewlett, son of a founder of Hewlett-Packard, waged a proxy battle against the plan. Ahead of the ISS announcement, Compaq shares fell 3.19 percent to $10.31 in active trade, while Hewlett-Packard shares rose 1.3 percent to $20.81, both on the New York Stock Exchange. That indicates that Compaq is trading at a 26 percent discount to the implied merger price, a much wider spread than even a month ago, when the difference had narrowed to about 13 percent. Deals viewed as likely to close typically trade in the 8 percent to 10 percent range. That 26 percent spread is much narrower than the more than 50 percent discount Compaq traded at in November after members of the Hewlett and Packard families said they would vote their 18 percent stake against the merger. Currently, investors, including those family members, who hold about 20 percent of the company's shares have said they will vote against the plan. http://www.nytimes.com/reuters/business/business-tech-compaq-hewlett-stocks.html?ex=1016352647&ei=1&en=9ccf96f8e89672f1 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact [log in to unmask] or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to [log in to unmask] Copyright 2002 The New York Times Company * To join/leave the list, search archives, change list settings, * * etc., please visit http://raven.utc.edu/archives/hp3000-l.html *