Subscribe for 17¢ / day

Associated Press

SAN JOSE, Calif. (AP) - A Delaware judge on Tuesday cleared Hewlett-Packard Co. of allegations it acted improperly in the proxy fight over the acquisition of Compaq Computer Corp., likely paving the way for completion of the high-tech industry's biggest merger.

Judge William B. Chandler ruled that former HP director Walter Hewlett failed to support his charges that HP bullied a big investor into supporting the $18.4 billion deal and lied to investors about the progress of the merger plans.

"The evidence demonstrates that HP's statements concerning the merger were true, complete and made in good faith," wrote the Chancery Court judge, who presided over the three-day trial last week in Wilmington, Del.

Hewlett can challenge the ruling in Delaware Supreme Court. The HP heir said he was disappointed with the decision but planned to review it closely before deciding on his next step.

Hewlett said he would maintain his involvement with the company.

Palo Alto-based HP, which has about 4,600 employees in Colorado, and Houston-based Compaq have said they plan to begin working together May 7. An HP spokeswoman did not immediately return a call Tuesday seeking comment.

Chandler's ruling concluded another contentious chapter in Hewlett's fight to stop the acquisition.

After HP narrowly won its shareholder vote on the Compaq acquisition, Hewlett tried to block the deal by suing the computing giant, which his father, William Hewlett, co-founded in 1939. He sued in Delaware because HP is incorporated there.

That step so angered HP management and its other directors that Hewlett was not renominated for another term on the board, leaving the Silicon Valley institution without a Hewlett or Packard in its boardroom for the first time.

A preliminary tally released two weeks ago found that HP won the shareholder vote 51.4 percent to 48.6 percent. That amounted to a lead of 45 million shares - likely enough to withstand the disqualification of the 17 million to 24 million shares voted by Deutsche Bank, the investor Hewlett claims was coerced.

The tally is not yet official because both sides are challenging individual ballots.

The trial in Delaware featured 10 hours of testimony from HP's top two executives, CEO Carly Fiorina and chief financial officer Robert Wayman.

Hewlett alleged that HP threatened to withhold future investment banking business from Deutsche Bank unless the investment firm canceled its vote against the deal and voted for it at the last minute.

In a voice mail for Wayman two nights before the March 19 shareholder vote, Fiorina suggested they do something "extraordinary" for Deutsche Bank. Then in a conference call with Deutsche money managers about an hour before the shareholder vote began, Fiorina said their decision was "of great importance to our ongoing relationship."

Copyright 2002 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Subscribe to Breaking News

* I understand and agree that registration on or use of this site constitutes agreement to its user agreement and privacy policy.