Shares of Hewlett-Packard and Compaq Computer ticked lower today, extending their losses the day after news of HP's plan to buy rival Compaq sparked a sell-off in both companies' shares.
The $20 billion stock deal - the biggest merger ever in the computer industry - got a cool reception from investors on fears that rivals IBM and Dell would snatch business from the merging company before it could hit its stride.
"This is a deal driven by weakness, not out of strength," said an arbitrageur, a trader who specialises in mergers and acquisitions. "The deal has been universally panned by the analyst community."
The trader pointed to the lack of a strategic rationale behind the deal, as well as the antitrust risk of such a huge merger as reasons for investors' distaste.
HP's shares fell 35 cents to $18.52 in trading on the New York Stock Exchange, while Compaq slipped 33 cents to $10.75.
Yesterday HP shares slumped nearly 19 per cent to a five-year low, while Compaq fell about 10 per cent, posting its biggest drop in more than four months.
The merger would create a rival to IBM with sales of $87.4 billion and would easily outstrip Dell as the world’s largest personal computer maker.