Fiorina & Capellas are pulling out all stops to push the deal through

Computer makers Hewlett-Packard and Compaq Computer struck back against criticism from HP heirs and launched a high profile advertising campaign to rally support for their controversial merger, the industry’s biggest.

Hewlett-Packard chief exec-utive Carly Fiorina and Compaq chief executive Michael Capellas issued their first public and detailed rebuttal to the case against the merger put forward by Walter Hewlett, a son of founder Bill Hewlett and a dissident HP board member who has turned against the plan.

“We believe his recent opposition to the merger is based on a static and narrow view of HP and the industry, selectively ignores the synergies of this transaction, relies on faulty financial assumptions and analyses, and offers no alternatives to address HP’s challenges and opportunities,” they wrote. Hewlett-Packard published a nearly 50-page presentation for distribution to investors which laid out in detail its cost saving expectations and showed why it believes revenue will not fall more than 5 percent after the $22.2 billion merger. It also took out double-page advertisements in the New York Times and the Wall Street Journal arguing for the benefits of the merger and the need to ‘embrace change’.

With the shareholder vote not expected before late February, analysts say the battle is only going to get more intense as both sides try to sway investors to their sides. “The only thing that’s going to stop this from getting to be the worst prime-time soap opera in the IT industry ever is if the companies decide to go to different plans. They either structure a new deal or abandon the deal and go to Plan B,” said Tom Austin, vice president at Gartner, a consultancy.

Deal ‘definitive’
But the chief financial officers from both companies stuck to their guns. “It is a definitive deal,” Compaq’s Jeff Clarke told Reuters in an interview. HP’s Bob Wayman said there were no plans to change, even though is was possible. “The terms of the deal were designed to withstand some of the pressures that one can anticipate in this. It was designed to be a strong commitment from both companies to proceed,” he said in the same interview.

Members of the founding Hewlett and Packard families have united in opposing the deal and hold 18 percent of HP stock.