Ms Carly Fiorina, dubbed last week by Fortune magazine the most powerful woman in business, is struggling for survival.

Since she took the helm of Hewlett-Packard (HP) in July 1999 - the first woman and the first outsider to run the Silicon Valley company - the group's market capitalisation has shrunk by $170 billion (€185 billion). The shares have tumbled 89 per cent since their peak in March 2000.

Much of that value destruction has been inflicted since the Compaq merger announcement. Despite a public relations blitz and a coast-to-coast hard-sell tour of institutions, investors have given the $25 billion merger the thumbs down. HP employs 2,150 people and Compaq employs 2,400 people in the Republic.

The company's shares have dropped 28 per cent since the Labor Day weekend, when news of the deal was leaked. In the past week, Compaq and Gateway, the fourth-largest personal computer maker, have issued profits warnings.

As the companies' share prices sag further, there are real concerns the $25 billion deal could fall apart. If that happens, the chances that Ms Fiorina and Mr Michael Capellas, her counterpart at Compaq, will be able to keep their jobs are minimal.

Ms Fiorina remains defiant. She says that much of the poor stock market performance can be put down to a deteriorating business environment. It is true that shares of Gateway have declined 42 per cent since Labor Day, but IBM has dropped just 1.6 per cent.

She admits she had expected some sort of immediate hostile reaction to the deal.

"I told both boards the market would hate this deal initially. But I think we underestimated the impact of how big a surprise this was," she says.

But now the surprise has worn off, investors continue to be sceptical. Not least, analysts worry that the combination indicates that the two groups are in a worse state than they had realised.

They also question the deal's strategic rationale. It is true that the acquisition would create the world's largest PC maker, cement the group's position in servers, provide a leg-up in storage and give a big boost to the company's ambitions to provide added-value, high-margin services. In essence, it would make HP more like IBM.

However, analysts are citing the 1986 merger of two once-great but troubled computer companies, Sperry and Burroughs, into Unisys. Unisys became the world's second-largest computer company with revenues almost as large as those of IBM. However, today IBM has a market capitalisation of $170 billion. Unisys is worth $2.87 billion.

Senior HP executives are clearly frustrated.

"I cannot tell you how many analysts came through our headquarters over the past year telling us that the PC industry had to be rationalised," says one.

A potentially big hurdle to the deal is the European Commission, which this year blocked General Electric's $43 billion acquisition of Honeywell. HP is in unofficial pre-negotiations with Commission officials.

An official notification from HP is expected later this month. The indications are that Brussels is not concerned about the hyper-competitive PC market.

But the biggest concern is that Ms Fiorina, whose background is in sales, will fail to integrate the two disparate cultures fully and quickly enough. Mr Capellas' company provides no role model. Its disastrous purchases of Digital Equipment and Tandem were what so weakened Compaq that it became an acquisition target.

Nevertheless, Ms Fiorina has hired consultants to help sort out the new behemoth, which will generate $56 billion of revenues and employ 145,000 staff. And she maintains the $2.5 billion cost savings are conservative.

The combined group will have $45 billion of materials procurement and the integration team has budgeted a reduction of only 1 per cent.

"This deal is very tight. Only shareholders can vote down this deal. And it isn't going to come apart between now and then," she says.

If it does reach a shareholder vote, the transaction is likely to pass, not least because the majority of those who oppose it will have voted with their feet and sold their shares. The danger is that so many sell that the shares continue to fall.

Even before the deal, Ms Fiorina was under so much pressure that a majority of her board took the unprecedented step of making public declarations of support.

Compaq's board must also be considering the implications of continuing with the deal regardless.

Investment bankers, who admittedly have an interest in seeing the transaction go through, say the terms of the deal make it difficult for one side to pull out unilaterally.

The implication is that it might be possible for both boards to decide to end the transaction without financial penalty.

"My job," says Ms Fiorina, "is to worry about the long-term health of this franchise, not the weekly stock market reaction."

But as the weeks of under-performance turn into months, the boards of the two companies must be asking themselves whether the anguish of calling off the deal would be less than the torment of continuing the transaction.

The two boards are stuck between a rock and a hard place.