If they were going to stay in the PC business, both desperately needed to eliminate a major competitor before they were bashed to death by Dell and a stagnent market while fighting each other tooth and nail.

Yes, it was traumatic, yes, the changes have confused everyone, but the PC business would be down anyway - the merger didn't cause that. Further, the PC business isn't coming back.

The PC market for major brand names is now neatly devided:
  • Dell for the direct market (but trying to enter the reseller market with unbranded machines).
  • IBM for their own integration needs and for a few large VARs.
  • HP for the reseller market (but with heavy competition from "White Box" PCs)
Capellas, with his "do it like Dell" approach was doomed. Only Dell can be Dell. The reseller market is very large (or Dell wouldn't be trying to get into it), and HP is now trying to undo the damage done before Capellas' departure.