Hewlett-Packard's management team misled shareholders about the projected gains likely to result from its planned acquisition of Compaq Computer despite their own personal concerns, claimed lawyers on Tuesday.
The accusations came to light during the opening arguments in a case brought by dissident shareholder Walter Hewlett, son of one of the founders, in a last ditch attempt to block the merger.
The proceedings, which are scheduled to last three days, are being presided over by Judge William B Chandler III in the Delaware Chancery Court in Wilmington, where HP was incorporated. He will rule on whether the $19 billion deal can finally go ahead, seven months after it was originally announced.
A central plank of the evidence put forward by Hewlett's lawyers comprised of a raft of documents from the HP/Compaq so called "value capture team", which is in charge of integrating the two companies.
This indicated that they would be unable to hit cost saving and profit boosting targets laid out in an S4 document that was filed with the US Securities and Exchange Commission in February.
The lawyers also cited from a report on a meeting in late February, where Compaq's chief financial officer, Jeff Clarke, described sales projections for the second half of 2002 as "a pure disaster", and operating profit estimates for 2003 as being more than $1 billion beneath targets.
An entry in Compaq chief executive, Michael Capellas' personal journal, meanwhile, said: "At current course and speed, we will fail."
HP's chief executive, Carly Fiorina, however, denied that the value capture reports provided "a full picture of what we could and should achieve... It's like trying to tell a whole movie with a single snapshot or frame. That can provide a very misleading picture".
She also denied the claim that HP illegally persuaded a large institutional shareholder, Deutsche Bank, to change its mind and vote in favour of the deal at the eleventh hour.
Hewlett alleges that the move swung the decision in favour of HP, with 51.4 per cent finally voting for and 48.6 per cent voting against the merger. Had the bank voted against the transaction, it would have been 50.3 per cent to 49.7 per cent.