Compaq Considers Strategy Without HP

NEW YORK – Michael Cappella's, the chief executive of No. 2 personal computer maker Compaq Computer Corp., has laid out a vision for the company in the event its planned merger with Hewlett-Packard Co. falls apart.

In a memo to employees obtained by Reuters, Cappella's said he was confident of the company's strategies ``whether we are part of the new HP or a standalone company.''

The $25.2 billion merger between computer and printer maker HP and Houston-based Compaq -- which would be the largest in the history of the computer industry -- has drawn fire from both the Hewlett and Packard families as well as some shareholders.

Cappella's said he believes the merger would be a boon to both companies, but said more details will be announced in the coming days ``as we analyze the situation further.''

``The best thing we can do right now is to maintain our positive momentum in the market,'' Cappella's said in the memo. ''That means continuing to focus on meeting -- and exceeding -- our goals for the fourth quarter.''

On Friday, the largest single shareholder in HP said it would oppose the company's acquisition of Compaq, dealing a potentially mortal blow to the merger spearheaded by HP Chief Executive Carry Fiorina.

The David and Lucile Packard Foundation, which controls 10 percent of Hp's stock, said it had made a preliminary decision to vote against the merger.

The decision unites all the children of Hp's founders against the deal, creating an opposition block of 18 percent of the company's stock and a public relations nightmare for management.

During the past two weeks, financial analysts have become more confident about Compaq's ability to go it alone without HP. After having posted losses in the third quarter, analysts say Compaq's business has been improving in the fourth quarter.