Wall Street held its nose Tuesday at Carly Fiorina's $20 billion plan to combine her shaky Hewlett-Packard with the stumbling Compaq.
Stocks of the two companies skidded, wiping out $10.5 billion of market value as investors debated whether the computer world's biggest-ever deal would even work.
"Essentially the companies are merging, not out of strength, but out of their own internal problems - they're having to survive, but they're not offering any premium at all," said computer analyst Daniel Morgan of Noble Financial Group.
Hewlett-Packard fell 19 percent to $18.87 on Tuesday, down $4.34, the biggest drop since 1987. Compaq lost $1.27 to $11.08. The slide also reduced the value of the all-stock deal to around $20 billion from $25 billion in just one day.
Fiorina is clearly on the biggest hot seat of her career.
"If she can pull it off, it's going to be a miracle," said Sunil Reddy, a fund manager with Fifth Third Bancorp.
Some analysts think Fiorina is also buying herself time by creating a merger.
"When you have problems, go out and buy somebody and see what happens, and you then can create a lot of internal cost cutting," said Morgan.
"It does create some time for her; you won't be able to measure her success for another couple of years," said Morgan.
The merger faces several pitfalls - ranging from getting shot down by European regulators to undermining the fabric of both companies.
Fiorina and her merger partner, Compaq chief Michael Capellas, plan to fire at least 15,000 from their payrolls in order to save $2.5 billion.
Such ominous layoff prospects can hurt productivity and also cause valuable workers to start sending out resumes en mass, say executive recruiters.
"It's going to be extremely challenging to integrate these two companies," said Shebly Seyrafi, tech analyst at A.G. Edwards & Sons.
"Wall Street would rather go on the sidelines and keep a show-me attitude toward this agreement, " said Seyrafi.
Shares of rivals rose, with IBM up $1.54 to $101.49 and Dell up 93 cents to $22.31. Gateway and Sun Microsystems also had been up most of the day but slipped, with Gateway down 5 cents to $8.92 and Sun off 5 cents to $10.95.
Analysts say the difficult merger plan will tie up the companies' managers who will lose their focus in one of the industry's worst periods.
"A defocused company is a big risk factor," said Morgan of Noble Financial.
"They just can't execute as well, because they're going to be too busy with internal executions."
Analysts said the two companies are also saddled with poor track records.
"We would have concerns about the ability of the companies to smoothly integrate the two operations," said Bear Stearns analyst Andrew Neff.