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Photo finish expected in HP vote

Hours before shareholders head to Silicon Valley for a meeting to decide the fate of the Compaq acquisition, the majority of shareholders keep quite as to which way they'll cast their votes.

Hours before shareholders head to Silicon Valley for a meeting to decide the fate of the Compaq Computer acquisition, the majority of shareholders still had not said publicly which way they are voting.

As a result, the fate of the world's largest technology merger remains unclear even as shareholders get ready to head to the Flint Center in Cupertino, Calif. The meeting is set to get underway at 8 a.m. PT, although the result of the vote that ends at that meeting still may not be known for days or possibly weeks.

So far, opposition to the deal from Walter Hewlett, David Packard and other members and foundations linked to HP's founding families represents about 18 percent of HP shares. Institutions representing another roughly 5 percent of shares have also come out against the deal, including Brandes Investment Partners, Wells Fargo and a number of large pension funds.

Meanwhile, HP has garnered the public support of more than 8 percent of shares, led by large shareholders Barclay's Global Investors, Putnam and Alliance Capital and a smattering of pension funds including the State Teachers Retirement System of Ohio.

The company also has the endorsement of Institutional Shareholder Services, whose clients make up about 23 percent of HP shareholders. However, many ISS clients have been making up their own minds, with some coming out publicly on both sides. ISS is most likely, analysts say, to influence those institutions who hold HP as part of an index fund, a group that represents about 9 percent of shares. Barclay's also turned its vote over to ISS because its chief executive is on HP's board of directors.

Although some institutions have gone public with their intent, a far greater number of shareholders have already voted by proxy but have not announced their vote. Tuesday's meeting is the last chance for shareholders to vote in person, or even reverse their decision if they have a last-minute change of heart. HP needs a majority of votes cast either by proxy or in person to seal the deal.

As a sign of just how close the vote is, few Wall Street firms have updated their predictions in recent days. One of the few analysts to issue a report Monday was UBS Warburg analyst Don Young, who reiterated his concerns over the deal, but declined to predict the outcome of the vote.

Needham analyst Charles Wolf said in an interview Monday that he thinks HP's biggest shareholders will not have the swing the vote.

"We have a tug-of-war, and now the tug-of-war is going to come down to the individual shareholders," Wolf said. He added that two factors are influencing HP shareowners: the fact that Walter Hewlett's arguments against the merger are easier to understand and the emotional impact of the founding families' vocal opposition.

Individual shareholders represent about 25 percent of HP shares.

Although outsiders remain largely in the dark, both Hewlett's advisors and HP have been getting updates from two sources. ADP, which receives decisions from institutions and casts their ballots for them, is providing both sides with an update. At the same time, each side's proxy solicitation firms are tabulating all the proxy cards they are receiving, white in HP's case and green for those being returned to Walter Hewlett's camp.

If the vote is close, it could be anywhere from a couple days to a couple of week before definitive results are known, based on past merger fights. After Tuesday, the votes are turned over to IVS Associates, a Delaware firm that tabulates the votes.