The largest single shareholder in Hewlett-Packard Co said last night that it would oppose the company's acquisition of Compaq Computer Corp, dealing a potentially mortal blow to the merger spearheaded by HP Chief Executive Carly Fiorina.
The David and Lucile Packard Foundation, which holds 10 per cent 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.
HP and Compaq vowed to press forward with the $25.2 billion merger, saying in a statement that they were disappointed by the foundation's position but would campaign in the coming weeks to secure the support of other investors.
Walter Hewlett, the son of founder Bill Hewlett, said he would solicit proxies against the merger if management put it to a vote.
"I believe there is sizable and widespread opposition to this transaction," said Mr Hewlett, an independent software developer who sits on the board of directors at HP, where he initially voted for the merger. Mr Hewlett first voiced opposition to the deal last month.
Analysts said the latest developments could spell the end of Fiorina's stewardship of the technology bellwether, which she argues must reinvent itself as a services and high-end computer powerhouse.
Many investors have opposed the plan from the outset, arguing that the deal would saddle HP with a bloated, low-profit personal computer business and lose customers and sales while management was distracted by the overwhelming task of integrating a global work force of 135,000.
HP shares jumped to $25 in after-hours trading from a close of $23.52 on the New York Stock Exchange. Shares of Compaq, which investors have seen as getting the better end of the deal, tumbled 12 per cent to $10.01.
"The street has voted on this (deal) from Day One," said Ashok Kumar, an analyst at US Bancorp Piper Jaffray. "The song of the dodo has a new meaning. It is as good as dead at this point."