Hewlett Family Leaves Fiorina, Capellas Stumbling to the Altar

The family and related interests also opposing the merger own about 5% of H-P's stock.
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The scions of William Hewlett have spoken, and they're telling Carly Fiorina and Michael Capellas to forget about getting any blessings from the family.

Walter B. Hewlett, Eleanor Hewlett Gimon and Mary Hewlett Jaffe, children of

Hewlett-Packard's

(HWP)

founder, plan to vote their H-P shares against the company's proposed merger with

Compaq

(CPQ)

if stockholders are given a chance to weigh in on the deal. The William R. Hewlett Revocable Trust is also opposing the union. Additionally, Walter Hewlett said he has been informed that the William and Flora Hewlett Foundation has reached a preliminary conclusion to vote against the merger.

The family members, the trust and the foundation together own more than 100 million Hewlett-Packard shares, or about 5% of the company's stock.

Putting on their collective bravest face, Compaq and H-P said they plan on seeing the merger through. "While we regret very much the Hewlett family's decision, we are not surprised," H-P said in a press release, adding that both companies "remain fully committed to the merger and expect shareholder approval."

The Hewlett family's decision will certainly pressure shareholders to rethink the validity of the merger, and Tuesday's market action tells the story. H-P closed up 17.3% to $19.81, and Compaq lost 5.5% to $8.50. Both stocks, like pretty much every other technology issue, including hardware makers, are well off their 52-week highs. H-P's high for the last year is $48, while Compaq peaked at $31.35.

When the

deal was announced on Labor Day, the merger was worth about $25 billion. Shareholders fled in droves when trading opened the next day, leading

TheStreet.com

and others to question whether the companies would be

able to pull off their grand plan. According to the terms of the agreement, H-P would swap 0.6325 shares for each Compaq share. Now the deal is valued at around $19 billion.

Expect the companies to continue loudly backing their plans to take over the computer hardware world as one. Just don't be surprised if they also quietly start formulating an exit strategy.