HP shares, meanwhile, fell over 3 percent as investors bet that the prospects for the computer and printer maker are somewhat better than they are for Compaq. 

Hewlett fell 77 cents, or 3.3 percent, to $22.75 while Compaq fell $1.25, or 11.1 percent, to $10.07. 

On Friday, the David and Lucile Packard Foundation, which owns more than 10 percent of Hewlett-Packard, said it would vote against the merger. Combined, the Hewlett and Packard families own more than 18 percent of the company and intend to vote against it. 

That, said David Katz, chief investment officer at Matrix Asset Advisors, sends a meaningful message to HP's board, which he said may now decide to abandon the deal. Katz owns both Hewlett and Compaq shares and has been against the merger since it was announced. 

Both Compaq and Hewlett-Packard said they will press ahead with the merger and will try to convince other shareholders to vote for it. 

Katz said that the decline in Compaq was due in part to the unwinding of positions by arbitrage traders who have bet that the merger would go through at the ratio the deal assigned. 

Meanwhile, the spread, or the difference between where Compaq's shares are trading and the higher value the merger places on them, is 45.3 percent. At Friday's market close, prior to the announcement, the spread was 31.4 percent. 

``If the deal does become derailed, it's a significant win for Hewlett shareholders in the near and medium term,'' Katz said, citing among other reasons, the potential departure of Chief Executive Carly Fiorina. 

Katz's view was in line with that of financial analysts. 

Personal computer analyst Joseph Beaulieu of Chicago-based Morningstar research said that Compaq's fall, at least, was expected. 

``Everytime you see news that's worse for the merger (Compaq) shares move in that direction,'' Beaulieu said. ``At this point, Compaq needs the merger much more than HP does.'' 

Wall Street agreed. Salomon Smith Barney, for instance, said in a research note that Compaq shares are likely to stabilize around $8 or $9. It also raised its price target for Hewlett-Packard shares to $28 from $25. 

Bear Stearns analyst Andrew Neff warned in a note, however, that euphoria over Hewlett-Packard may be short-lived given that its price-to-earnings ratio is already at historical highs.