Short Interests: Funds minus cash as deal won’t compute

When Hewlett-Packard Co. announced last week that it was buying Compaq Computer Corp., investors reacted as if they had accidentally taken a swig of sour milk. The stock prices of both companies plummeted because of Wall Street fears that it was not a marriage made in heaven.

That’s bad news for the hundreds of mutual funds that have large holdings in the two companies.

A total of 690 funds own shares of Hewlett-Packard, while 622 own shares of Compaq, according to Morningstar Inc. It’s especially disturbing for those funds that have huge stakes in both of the companies.

Those with the biggest exposure through the end of June include the $78.8 billion Fidelity Magellan Fund, which held 12 million shares of Compaq and 10.5 million shares of Hewlett-Packard; the $19.2 billion Putnam Fund for Growth & Income, which held 8.4 million shares of Compaq and 9.2 million shares of Hewlett-Packard; and the $19.8 billion Vanguard PRIMECAP Fund, which held 6.5 million shares of Compaq and 7.8 million shares of Hewlett-Packard.

All three funds have been so-so performers in this down market, according to Morningstar. Even if last week’s news has no lasting impact on the megafunds, it’s certainly an additional headache for their managers, none of whom would talk about their future plans with regard to their holdings in the two companies.

Banking Miss Daisy

Here’s some news that’s sure to make chatting on a phone while driving seem tame.

According to a report from Meridien Research Inc., within the next couple of years millions of Americans could be trading stocks and doing banking while driving.

Meridien, in Newton, Mass., forecasts that the technology – called “telematics” – to do such activities will be installed in 9 million vehicles by 2003.

Telematics combines wireless, voice-recognition and GPS (global positioning system) technology.

Already a partnership between Fidelity Investments and OnStar, a General Motors subsidiary, allows owners of certain GM cars to place trades, get balances and receive stock quotes through the push of a button and a few verbal commands.

Meridien points out that telematics are voice-activated and hands-free – and therefore wouldn’t be affected by new laws that restrict phone use while driving.

Of course, the driver whose car gets rear-ended during a stock trade may be disappointed to hear that kind of news.

Legal difficulties

Here’s another sign that tech is dead and that Shakespeare had a good idea:

Silicon Valley is now killing off its lawyers, er, or at least firing them in droves. Fenwick & West LLP, a Palo Alto, Calif., law firm whose practice boomed along with technology stocks, sent 32 lawyers and 15 paralegals packing Thursday.

The cuts follow the firing of 86 attorneys and 50 staff members earlier this summer at Cooley Godard in San Francisco.