Filed by Hewlett-Packard Company Pursuant to Rule 425
Under the Securities Act of 1933
And Deemed Filed Pursuant to Rule 14a-12
Under the Securities Exchange Act of 1934
Subject Company: Compaq Computer Corporation
Commission File No.: 1-9026
This filing relates to a planned merger (the "Merger") between Hewlett-Packard
Company ("HP") and Compaq Computer Corporation ("Compaq") pursuant to the terms
of an Agreement and Plan of Reorganization, dated as of September 4, 2001 (the
"Merger Agreement"), by and among HP, Heloise Merger Corporation and Compaq. The
Merger Agreement is on file with the Securities and Exchange Commission as an
exhibit to the Current Report on Form 8-K, as amended, filed by Hewlett-Packard
Company on September 4, 2001, and is incorporated by reference into this filing.
The following is a series of frequently asked questions and answers relating to
the Merger. This series of FAQs is posted on HP's internal web site.
[HP] ANSWERS QUESTIONS - REGARDING THE PC BUSINESS, CULTURE, SOFTWARE,
INTEGRATION AND MORE - SUBMITTED BY EMPLOYEES
NEW MERGER FAQS AVAILABLE ON [HP'S INTERNAL WEB SITE]
1. WHAT DOES COMPAQ BRING TO HP (TECHNOLOGIES, EXPERTISE, ETC.) THAT HP
DOES NOT ALREADY HAVE?
Compaq brings assets in many areas that complement HP, including:
o expertise in mission-critical NT services, which complements HP's HP-UX
mission-critical services;
o Himalaya Fault-Tolerant and Proliant servers, which enhance HP's server
line;
o leadership in mid-range storage-area networks (SANs), which enhance our
market position;
o direct-distribution model, which complements HP's existing direct
distribution efforts; and
o strength in commercial PCs that matches HP's strength in consumer PCs.
The new HP will be a better, stronger partner for our customers. We'll have
a broad understanding of customer challenges from industry standard to
high-end as well as greater capabilities to deliver:
o solutions;
o leadership across markets (enterprise, small-medium business and
consumer);
o leadership across products (IPS, enterprise systems, personal systems,
storage, services);
o an understanding of customer challenges from industry standard to
high-end; and
o definition of new, open architectures.
2. GIVEN THE DECLINING PROFITABILITY OF THE PC BUSINESS, WHAT DOES HP
HAVE TO GAIN FROM PICKING UP A LARGE PC BUSINESS FROM COMPAQ?
The merger with Compaq brings not only a large PC business to the new HP
but also industry leadership in access devices. Compaq's offerings in this
area include Internet appliances, iPAQ personal audio player (MP3 player),
iPAQ Music Center, and micro-projectors. In addition to these offerings,
Compaq's brand strength in enterprise handhelds and desktop PCs complements
HP's brand strength in the consumer market for PCs and handhelds. Compaq
also has a direct distribution model that will help accelerate our
transition to a dual distribution model.
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Further, by combining HP's strength in consumer PCs and Compaq's strength
in commercial PCs, the combined company can achieve economies of scale and
obtain a more effective distribution capability to meet the challenges of
the maturing PC industry. While the growth of the PC market has slowed, it
still offers great opportunity for HP, especially in markets outside the
U.S., where there is high potential for growth in both consumer and
commercial PCs.
3. HOW WILL HP LEVERAGE COMPAQ'S DIRECT-DISTRIBUTION CAPABILITIES? WHAT
WILL BE THE EFFECT ON HP'S CHANNEL PROGRAM?
One of the strengths that Compaq brings to the new HP is a direct
distribution capability that is more developed than our own.
Because of legal and regulatory restraints, HP cannot discuss in detail how
a merger would affect channels programs. However, the three key
fundamentals of HP's channels programs will not change: partner
involvement, clear rules of engagement, and continued investment. HP has
always believed that partnerships are key to our success and our commitment
to our partners will not change with the creation of the new HP.
We believe the proposed merger will help us become a better, stronger ally.
We will continue to provide tools and invest to help our channel partners
be successful and confidently make investments to grow their business.
4. I'VE HEARD THAT ONE OF THE BENEFITS OF THE MERGER IS COMPAQ'S DIRECT
DISTRIBUTION CAPABILITY. WHAT DOES THIS MEAN FOR HP'S DIRECT MODELS SUCH
AS HP PRIME?
No decisions have been made at this time regarding how to integrate HP's
direct models following the merger close. Keep in mind that the goal is to
take the best of both HP and Compaq to deliver a strong combined company.
We will seek to leverage strengths where it makes sense, including in the
direct distribution space. In the meantime, it is imperative that all
employees maintain forward momentum and continue to focus on short-term
business results. We must not let questions about the merger immobilize us
or distract us from day-to-day business. As Carly has said, we cannot
afford to have even one person taking a "wait and see" attitude.
5. HOW WILL THE MERGER ACCELERATE HP'S GO-TO-MARKET STRATEGY IN THE
CONSUMER AND ENTERPRISE SPACES?
Enterprise customers increasingly want to purchase integrated solutions,
not individual products and technologies. They seek to benefit from the
economics and flexibility of standards-based platforms and architectures,
and they want stronger partnerships with a smaller number of global
end-to-end solutions providers.
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The combined company's sizable and diverse installed base makes its
enterprise platforms extremely compelling to systems integrators and
application developers, thereby enhancing the ability of the combined
company to offer market-leading solutions to customers.
The combination gives us a significant presence in both direct and indirect
channels, improving our ability to sell to customers any way they want to
buy. We will serve a broader set of customers that range from consumers to
small-and-medium businesses to enterprise. Our global geographic coverage
will be broader and deeper.
With the merger, the new HP will dramatically increase its "feet on the
street" with double the size of HP's current sales force and professional
services staff (i.e., outsourcing, consulting and support).
6. IN ADDITION TO THE STRATEGIC BENEFITS, HOW WILL THE MERGER HELP THE
NEW HP ACHIEVE A MORE COMPETITIVE COST STRUCTURE?
The merger will help the new HP achieve a more competitive cost structure
in several ways. The combination will fundamentally improve our earnings
power through significant cost synergies and operating efficiencies,
irrespective of market conditions. We expect to improve annual operating
results by more than $2.5 billion by mid-fiscal 2004, which will allow us
to achieve higher operating margins and profit growth than either company
could achieve independently. The elimination of duplication in the new HP
will generate a more cost-effective structure by combining an increased
revenue base with a streamlined cost base resulting in greater cost
effectiveness.
By leveraging the new HP's direct distribution model, we expect to
distribute a greater volume of products such as PCs and Intel-based servers
with quicker inventory turnover. We will also realize greater procurement
savings, as our combined annual materials procurement spend will give us
considerable negotiating power with suppliers.
7. HOW WILL SOFTWARE FIT INTO THE NEW HP?
Software continues to play a very important role in the new HP. Although
Compaq's software assets were not a major rationale behind the merger there
are several synergies among our software offerings.
HP Netaction and HP OpenView software products complement Compaq's
infrastructure platforms by delivering a solid software infrastructure for
developing, integrating, deploying and managing mobile, rich media and
e-services solutions.
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The new HP will be able to provide world-class manageability by taking the
best features and technical strengths of OpenView and Compaq's two
management products, TEMIP and Insight Manager.
In the area of rich media, Compaq has a presence in Data Access Middleware,
Remote Procedure Call Middleware and Transaction Servers, while HP's
Netaction Internet Operating Environment covers the Application Server.
Combined, our products will create new value for our customers.
HP and Compaq are both top players in voice and wireless solutions. The new
HP will be able to leverage HP's Opencall platform and Compaq's
capabilities to engineer new world-class communications platforms and
solutions.
While the merger with Compaq adds several software assets to our existing
portfolio, it also increases the size of our installed base and this
presents a great opportunity to leverage our existing software products
into new IT infrastructure.
8. HP AND COMPAQ HAVE MANY SIMILAR PRODUCTS. HOW WILL WE HANDLE THE
OVERLAP?
Integration teams have already been formed for each business unit to build
joint product roadmaps and assess the product overlap between the two
companies. The purpose of this assessment is to understand, in the context
of these product roadmaps and customer needs, which products align to
create the most compelling offerings for our customers and competitive
advantage for the new HP. For those products that will not be part of the
new HP's offerings, we are putting in place investment protection and/or
transition plans for our customers. Our objective is to have detailed
transition plans and product roadmaps available for our customers within 30
days after the merger has been approved.
9. WILL THE NEW HP STOP INVESTING IN HP-UX AFTER THE MERGER?
No. HP-UX is a critical component of our enterprise data center offerings
and always-on Internet infrastructure strategy. Our strategy to lead the
industry in championing and developing market-unifying architectures
involves integrating standard components at all levels of the IT stack,
including at the operating system level. Therefore, we will continue to
invest in our multi-OS strategy focused on HP-UX, NT and Linux.
10. WHEN CAN WE EXPECT TO HEAR DETAILS ABOUT THE IMPACT OF THE MERGER ON
OUR DIRECT PRODUCT LINES? WILL THE FIELD BE NOTIFIED PRIOR TO CUSTOMERS?
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Due to legal and regulatory constraints, we will not be able to announce
decisions regarding specific product lines or roadmaps until after we have
received regulatory and shareowner approval and the merger closes. Our
objective is to have detailed transition plans and product roadmaps
available for our customers within 30 days after the merger has been
approved. Whenever possible, we will inform the sales force, and employees
in general, of announcements that affect them, prior to notifying the
public. There may be instances where advance notice is not possible, but
these will be exceptions.
11. WILL THERE CONTINUE TO BE AN OVERALL COUNTRY AND REGION MANAGEMENT
STRUCTURE WHICH WILL HAVE RESPONSIBILITIES FOR THE COMPLETE SET OF
PRODUCTS, SERVICES AND SEGMENTS WITHIN THE REGION/COUNTRY?
Decisions regarding organization structure, roles and responsibilities are
still under review. Additional organizational announcements are not
expected to be made until early 2002.
12. "CUSTOMER OBSESSION" IS LISTED AS ONE OF THE KEY INTEGRATION
PRINCIPLES FOR THE MERGER. WHAT TCE (TOTAL CUSTOMER EXPERIENCE)
REPRESENTATIVES FROM HP AND COMPAQ ARE PART OF THE MERGER TEAM?
As Webb McKinney noted in the NOVEMBER 7 INTEGRATION UPDATE [filed with
the Securities and Exchange Commission by HP on a Form 425 dated
November 13, 2001 and posted on HP's internal web site], the team is
working on plans to align each of the four operating units and the new
company as a whole around customer needs, focused business strategies and
go-to-market models.
In line with the Integration Office's objective to ensure obsessive
customer focus, they have appointed go-to-market leads. Thomas Volk (HP)
and Gustavo Eichelmann (Compaq) will represent enterprise go-to-market and
Leslye Louie (HP) will represent consumer go-to-market. These leads will be
responsible for ensuring TCE and "one face to the customer" ideologies
remain in the forefront as the Integration Office plans organizational
design, channel and sales programs, as well as product, service and support
offerings for the merged company.
13. WHAT IS THE COMPAQ CULTURE? IS WORK BEING DONE TO EXAMINE BOTH
COMPANIES' CULTURES TO ENSURE THAT WE RETAIN THE BEST OF BOTH HP AND
COMPAQ?
The initial work done by the culture planning team indicates that HP and
Compaq are guided by many of the same beliefs and principles, such as a
focus on customer service, innovation and community, as well as trust,
respect and integrity. Hallmarks of Compaq culture include great speed and
sense of urgency, adaptability to change and resilience, all qualities that
will complement HP's culture.
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We recognize that integrating two cultures - each with its distinct
heritage - is a challenge, and that the success of the combined company
depends on building a strong, common culture.
In collaboration with an outside consulting firm, HP's Enterprise
Workforce Development team - part of the HR organization -- has already
begun work on examining strengths of both companies' cultures. After the
close of the merger, the best of HP and Compaq will be integrated into all
aspects of the combined company, including all HR processes, systems and
programs, education and development, manager training, and talent
management and acquisition.
14. CARLY HAS SAID PUBLICLY THAT THE NEW ORGANIZATION WILL MAINTAIN A
CENTER IN HOUSTON, AND THAT HP HAS BEEN MOVING WORK OUT OF CALIFORNIA FOR
SOME TIME. WILL THE NEW HP HAVE FEWER JOBS LOCATED IN THE BAY AREA?
The new HP will be headquartered in the Bay Area and while there will be
some movement of work centers from one location to another, decisions
regarding specific staffing requirements and job locations are still being
reviewed. However, Houston will remain a key center of expertise for the
new company. In all cases, management will strive to minimize disruption
wherever possible, consistent with our business objectives.
15. WHAT ARE THE PLANS TO MERGE HP LABS AND COMPAQ'S LABS?
Decisions regarding these assets are still under review.
16. WILL THE MERGER (ONCE FINAL) RESULT IN ANY ADJUSTMENT OF HP STOCK
OPTION PRICES?
No adjustment will be made to any outstanding stock options or Stock
Appreciation Rights (SARs) due to the completion of the merger. The merger
will only affect outstanding stock options and SARs in Compaq stock.
17. WILL OUR BENEFITS/TOTAL REWARDS CHANGE?
The integration team is currently evaluating both HP's and Compaq's
compensation and benefits programs and processes. Any changes that may be
made will be communicated as appropriate.
18. WHAT IS HP DOING TO EDUCATE THE ANALYST COMMUNITY?
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Since the news was announced, Carly and Compaq CEO Michael Capellas have
been meeting with analysts and institutional investors to ensure that they
understand the strategic and growth benefits of the proposed merger. Many
people initially focused on the cost savings and PC consolidation aspects
of the merger. Carly and Michael are making sure investors and analysts
understand the strategic value, particularly in the enterprise space. Keep
in mind that the merger is expected to close sometime in the first half of
2002, so HP will continue to share the story in the marketplace in the
months ahead.
19. EXPLAIN THE PROCESS BY WHICH HP SHAREOWNERS VOTE IN CONNECTION WITH
THE MERGER.
Because of the number of shares that HP has agreed with Compaq to issue in
connection with the merger, HP's shareowners must approve the issuance of
the shares. At the same time, HP is preparing to offer securities to Compaq
shareholders. Compaq shareowners must approve the merger as a whole.
Accordingly, both companies must hold shareowner votes, a process that is
regulated by the Securities Exchange Commission (SEC). In order to comply
with SEC rules and regulations, HP must file (jointly with Compaq, which
has its own regulated shareowner vote) a registration statement with the
SEC that includes a proxy statement/prospectus that contains information
for shareowners to consider when voting.
While HP has made its initial filing of its registration statements, the
SEC has an opportunity to review the document and comment on it, after
which HP will discuss with the SEC possible changes or additions to the
filing. Once the SEC and HP are agreed on a filing, it may become final,
and HP can at its discretion set a meeting date and mail the proxy
materials to its shareowners. Once the materials are mailed to shareowners,
HP will work to collect proxies from its shareowners so that their shares
can be voted at the meeting. More detail on the voting of proxies and
attendance at the special meeting will be available in the proxy materials
when mailed.
HP's timeline for filing its registration statement and receiving and
responding to SEC comments is not certain, and in any event even after HP
receives SEC clearance HP may wait to determine its meeting date until it
can accurately predict its antitrust review timeline. Therefore, we cannot
yet provide any specific information on the timing of HP's shareowner
mailing or meeting.
20. IS THIS A MERGER OR AN ACQUISITION? MANY MEDIA AND ANALYST REPORTS SAY
THE FORMER, BUT CARLY AND MICHAEL SAY IT'S A MERGER.
The distinction between a merger and an acquisition is essentially a
semantic one. While the terms merger and acquisition have some technical
and structural meanings if examined from a technical legal perspective, the
terms are generally used interchangeably to refer to a combination of
companies.
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Calling a combination an acquisition suggests a large or dominant company
taking over a smaller, such as to fill a single gap in a wide product line.
On the other hand, calling a combination a merger, emphasizes that both
parties are bringing significant assets to the combined company, such as
the current agreement with Compaq, where both companies are global
technology leaders with broad sets of products and services. Because HP
will be the surviving company name, some members of the media will
inevitably focus on the acquisition terminology, but Carly and Michael have
used the merger language to more accurately reflect the broad contributions
of both companies.
21. WHAT IS THE STATUS OF THE WORLDWIDE REGULATORY/ANTI-TRUST APPROVALS FOR
THE MERGER?
In the United States, the U.S. Federal Trade Commission will review the
transaction. On September 25, 2001, HP submitted its government filing,
called a Hart-Scott-Rodino filing, for the FTC to review. As expected in a
transaction of this size, the FTC has made what is known as a "second
request" for more information. HP has begun the process of discussing this
request with the FTC and is working to gather and supply the additional
information the agency needs to make its decision. As the time required to
fulfill a second request is uncertain, we cannot know at this time when
that process will be completed. This uncertainty is the reason that we
initially provided our expected closing time merely as the first half of
the calendar year 2002.
In Europe, we have begun informal discussions with the reviewing agency
that have been constructive. We are working to complete and file our
regulatory paperwork with the European Union, after which a review and
discussion period will ensue.
We continue to be confident that we will gain regulatory approval for the
merger in the United States and in Europe.
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FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements that involve risks,
uncertainties and assumptions. If any of these risks or uncertainties
materializes or any of these assumptions proves incorrect, the results of HP
and its consolidated subsidiaries could differ materially from those
expressed or implied by such forward-looking statements. All statements other
than statements of historical fact are statements that could be deemed
forward-looking statements, including any projections of earnings, revenues,
synergies, accretion or other financial items; any statements of the plans,
strategies, and objectives of management for future operations, including the
execution of integration and restructuring plans and the anticipated timing
of filings, approvals and closings relating to the Compaq transaction or
other planned acquisitions; any statements concerning proposed new products,
services, developments or industry rankings; any statements regarding future
economic conditions or performance; any statements of belief and any
statements of assumptions underlying any of the foregoing. The risks,
uncertainties and assumptions referred to above include the ability of HP to
retain and motivate key employees; the timely development, production and
acceptance of products and services and their feature sets; the challenge of
managing asset levels, including inventory; the flow of products into
third-party distribution channels; the difficulty of keeping expense growth
at modest levels while increasing revenues; the challenges of integration and
restructuring associated with the Compaq transaction or other planned
acquisitions and the challenges of achieving anticipated synergies; the
possibility that the Compaq transaction or other planned acquisitions may not
close or that HP, Compaq or other parties to planned acquisitions may be
required to modify some aspects of the acquisition transactions in order to
obtain regulatory approvals; the assumption of maintaining revenues on a
combined company basis following the close of the Compaq transaction or other
planned acquisitions; and other risks that are described from time to time in
HP's Securities and Exchange Commission reports, including but not limited to
the annual report on Form 10-K for the year ended Oct. 31, 2000, and
subsequently filed reports. HP assumes no obligation and does not intend to
update these forward-looking statements.
ADDITIONAL INFORMATION ABOUT THE MERGER AND WHERE TO FIND IT
On November 15, 2001, HP filed a Registration Statement with the SEC
containing a preliminary joint proxy statement/prospectus regarding the
Merger. Investors and security holders of HP and Compaq are urged to read
the preliminary joint proxy statement/prospectus filed with the SEC on
November 15, 2001 and the definitive joint proxy statement/prospectus when it
becomes available and any other relevant materials filed by HP or Compaq with
the SEC because they contain, or will contain, important information about
HP, Compaq and the Merger. The definitive joint proxy statement/prospectus
will be sent to the security holders of HP and Compaq seeking their approval
of the proposed transaction. The preliminary joint proxy
statement/prospectus filed with the SEC on November 15, 2001, the definitive
joint proxy statement/prospectus and other relevant materials (when they
become available), and any other documents filed by HP or Compaq with the
SEC, may be obtained free of charge at the SEC's web site at www.sec.gov. In
addition, investors and security holders may obtain free copies of the
documents filed with the SEC by HP by contacting HP Investor Relations, 3000
Hanover Street, Palo Alto, California 94304, 650-857-1501. Investors and
security holders may obtain free copies of the documents filed with the SEC
by Compaq by contacting Compaq Investor Relations, P.O. Box 692000, Houston,
Texas 77269-2000, 800-433-2391. Investors and security holders are urged to
read the definitive joint proxy statement/prospectus and the other relevant
materials when they become available before making any voting or investment
decision with respect to the Merger.
HP, Carleton S. Fiorina, HP's Chairman of the Board and Chief Executive
Officer, Robert P. Wayman, HP's Executive Vice President, Finance and
Administration and Chief Financial Officer, and certain of HP's other
executive officers and directors may be deemed to be participants in the
solicitation of proxies from the stockholders of HP and Compaq in favor of
the Merger. The other executive officers and directors of HP who may be
participants in the solicitation of proxies in connection with the Merger
have not been determined as of the date of this filing. A description of the
interests of Ms. Fiorina, Mr. Wayman and HP's other executive officers and
directors in HP is set forth in the proxy statement for HP's 2001 Annual
Meeting of Stockholders, which was filed with the SEC on January 25, 2001.
Investors and security holders may obtain more detailed information regarding
the direct and indirect interests of Ms. Fiorina, Mr. Wayman and HP's other
executive officers and directors in the Merger by reading the preliminary
joint proxy statement/prospectus filed with the SEC on November 15, 2001 and
the definitive joint proxy statement/prospectus when it becomes available.
Compaq and Michael D. Capellas, Compaq's Chairman and Chief Executive
Officer, and certain of Compaq's other executive officers and directors may
be deemed to be participants in the solicitation of proxies from the
stockholders of Compaq and HP in favor of the Merger. The other executive
officers and directors of Compaq who may be participants in the solicitation
of proxies in connection with the Merger have not been determined as of the
date of this filing. A description of the interests of Mr. Capellas and
Compaq's other executive officers and directors in Compaq is set forth in the
proxy statement for Compaq's 2001 Annual Meeting of Stockholders, which was
filed with the SEC on March 12, 2001. Investors and security holders may
obtain more detailed information regarding the direct and indirect interests
of Mr. Capellas and Compaq's other executive officers and directors in the
Merger by reading the preliminary joint proxy statement/prospectus filed with
the SEC on November 15, 2001 and the definitive joint proxy
statement/prospectus when it becomes available.
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