it's hard to know exactly what's going on but if you're sure the puppy is terrified, separate the two dogs with a baby gate, which allows them to see each other, even sniff each other and be able to exchange canine communication signals but will be safe.
it isn't fair to either your resident dog or the new dog to just throw them together and hope for the best -- it's not likely to work out.
watch the dogs closely while still separated.
when either dog gives friendly signals (doesn't have to be directly to the other dog) praise him softly and encourage him to move away from the other dog (yes, that's right - move away. most dogs who are reactive or afraid are seeking to increase distance from the object of their reactivity/fear. you can teach them that offering appropriate, calm behavior gets them what they want. eventually they start to change their mind about the scary thing and want to start getting closer all the while still feeling calm and happy).
if you're not familiar with calming signals, i recommend reading about them.
dogs have very subtle ways of communicating and if those signals are ignored, things escalate and are bound to end in a scuffle or worse.
normal dogs try to avoid conflict at all costs, but under pressure they can be pushed to react inappropriately.
it's also not normal for adult dogs to strike out at puppies under 4 months. how old is this puppy?
these websites may help with understanding calming signals and helping dogs learn alternative ways of interacting (which are based on understanding dog language):
http://ahimsadogtraining.com/blog/bat/
http://www.canis.no/rugaas/index.php
http://www.youtube.com/watch?v=MgnLgHFRJu4
http://www.youtube.com/watch?v=Lj7BWxC6iVs
best wishes to you and both dogs.
edit: oops. sorry. parallel walking is also an excellent way to get two dogs used to being with each other without the pressure of actually interacting:
http://www.k9magazinefree.com/k9_perspective/iss36p9.shtml