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HP-Compaq dissent grows
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October 16, 2001: 12:04 p.m. ET
A major shareholder will vote against the Compaq deal because of risks.
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NEW YORK (CNNmoney) - Matrix Assets Advisors, a major shareholder of both Hewlett-Packard Co. and Compaq Computer Corp., urged each company to reconsider HP's $25 billion takeover of Compaq.
In a letter to the boards of HP and Compaq, New York-based Matrix urged the companies to take an equally bold step and abandon the proposed merger. Matrix Asset Advisors, which owns 531,675 shares of Hewlett-Packard and 826,846 shares of Compaq, vowed to vote its shares against the deal.
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The stock of both Compaq and HP has been in freefall since the deal was announced Sept. 3, Matrix's Katz said in the letter. HP and Compaq rivals have also expressed "unbridled enthusiasm" for the merger and none has expressed concern for the competitive challenges posed by the transaction.
"From a competitive standpoint, while perfect execution could transform HWP/CPQ into a powerhouse three to five years from now, we think the substantial near and intermediate term risks associated with integrating multiple products and business lines, diverse sales force and sales channels, and management far outweigh this potential upside," Katz said.
Matrix is not trying to persuade other shareholders to vote against the merger but wants to "make its feelings known," the Wall Street Journal said Tuesday, which first reported the story.
Much of the analyst community has also weighed in against the merger, Katz said.
Matrix said it will continue to hold its shares if the merger does not go through. The boards of both firms have yet to respond to the letter, Matrix's Chief Investment Officer David Katz said.
HP CEO Carly Fiorina has seemingly ignored the negative sentiment the merger has generated, Katz said.
"If the deal doesn't go through there will probably be a new CEO at HP," he said.
Shares of Hewlett-Packard (HWP: Research, Estimates) were unchanged in late morning trading Tuesday while Compaq (CPQ: Research, Estimates) gained minutely. 
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