"Shareholders are getting restless," said Bruce Raabe, chief investment officer of Collins & Co, which oversees US$500 million, including 150,000 Hewlett-Packard shares. "H-P leadership has not convinced the public."
Shareholders say they're not convinced Hewlett-Packard will get enough out of this purchase to make it worth the risk. With Compaq, they'd be absorbing a company that tried to reorganize three times in two years while losing its lead in the global PC and US server markets to Dell Computer Corp.
Hewlett-Packard would lose a lot of time trying to figure out how to combine with Compaq, and is worth more on its own, said Walter Hewlett.
"The extensive integration associated with this transaction is not worth taking," he said. "The merger would distract Hewlett-Packard management and employees."
It gets worse for Fiorina. Investors said that even if the purchase is completed, they're not sure she's up to the challenge of running such a big company.
"I haven't seen enough out of H-P to give me confidence in Carly," said Chris Ely, a fund manager with Loomis Sayles & Co, which manages about US$65 billion. "She's taken a couple of steps where she's stumbled." Hewlett-Packard has reiterated several times that the board supports Fiorina and this purchase. Fiorina has been adamant that she will submit the deal for shareholders to decide, regardless of how low the stock slipped.
"We're not going to back off this deal prior to a shareowner vote," Fiorina said in an October interview. "Period." Still, her support appears to be cracking now.
Walter Hewlett said he's planning to call each of the eight other board members and discuss his feelings. If he wins them over -- or convinces the Packard family foundation to join him -- it would be tough for Fiorina to recover.
The two families account for 15 percent of the outstanding stock and still command the respect of other investors. The foundation started by David Packard, who founded the company with William Hewlett in a Palo Alto garage in 1939, is the company's largest shareholder. A spokeswoman said yesterday the foundation hasn't decided how it will vote.
"They carry a lot of weight with their opinion," Collins & Co's Raabe said. "This will change the way the vote shakes out, absolutely."
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