Carly Fiorina, Hewlett-Packard chairman and chief executive, was dealt a slap in the face last week when the Packard Foundation announced its opposition to the company's $25 billion (€28 billion) bid for rival Compaq Computer.
Only on Wednesday had she met the foundation board members and walked away quite hopeful that Hewlett Packard's (HP) largest shareholder would support the transaction.
In a sign that investors believed the controversial deal was all but dead, HP's shares gained 6 per cent and Compaq shares fell 11 per cent in after-hours trading last Friday.
The foundation, a charitable organisation that owns more than 10 per cent of HP's shares, is controlled by the daughters of late HP co-founder David Packard. With its decision, the three Packard sisters join their brother and the children of co-founder Mr William Hewlett, who had earlier expressed their opposition to the deal.
The Hewlett and Packard heirs have now effectively created a voting block against the transaction, and the weight of their opposition is considered to be much greater than the 18 per cent of shares they jointly control.
Many industry observers suggest the families' opposition will prove too great a challenge for HP's management to overcome.
Mr Walter Hewlett, a current HP board member and the first heir to publicly oppose the deal, argues the deal would dilute HP's profitable printing business by increasing the company's exposure to the highly competitive PC market. Many Wall Street analysts express similar concerns.
Last week the foundation said it understood the strategic considerations behind the proposal, "but after thorough study and analysis the board has preliminarily decided, on balance, that the best interests of the foundation would be better served by Hewlett-Packard not proceeding with the proposed transaction".
While disappointed by the foundation's decision, the company insisted it remained committed to the deal and would continue to communicate its merits to its shareholders.
There is clearly strong motivation from the top, with most analysts suggesting Ms Fiorina is now fighting to save her job.
She has been a vocal champion of the Compaq deal and has now staked her reputation on seeing this acquisition completed.
She may see that the support of institutional shareholders might be more tolerant of the risks involved in the transaction. HP argues that, despite widespread concern from Wall Street analysts, the investment community will become more supportive of the acquisition once it learns more about the benefits of the deal.
Critical to that effort would be to sway Institutional Shareholder Services (ISS), the small but influential shareholder advisory group, that represents a "considerable"number of HP investors. Barclays Global Investors, which hold a 3 per cent stake, has turned over its vote to ISS, while smaller investors that do not have research departments will also keenly await ISS's opinion.
Public statements from ISS so far have not been very encouraging for HP, but the advisory group has stressed it has not yet undertaken a detailed analysis of relevant data.
And other investors must also now seriously consider whether the Hewlett and Packard families have managed to generate enough momentum to derail HP's bid for Compaq.
