____________________________________________________________



				   FORM 10-Q


		       SECURITIES AND EXCHANGE COMMISSION
			     Washington, D.C. 20549



	      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
		     THE SECURITIES EXCHANGE ACT OF 1934



	       For the Quarterly Period Ended September 30, 1996



			Commission File Number 1-9026



			 COMPAQ COMPUTER CORPORATION
	     (Exact name of registrant as specified in its charter)


			 Delaware        76-0011617                  
	      (State or other jurisdiction of (I.R.S. Employer        
	      incorporation or organization)  Identification No.)     


		       20555 SH 249, Houston, Texas 77070
				(713) 370-0670
	    (Address, including zip code, and telephone number, including
	       area code, of registrant's principal executive offices)



Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange 
Act of 1934 during the preceding 12 months (or for such shorter period 
that the Registrant was required to file such reports), and (2) has been 
subject to such filing requirements for the past 90 days.

			    Yes  [ x ]   No  [   ]


The number of shares of the registrant's Common Stock, $.01 par value, 
outstanding as of September 30, 1996, was 270.8 million.

      ____________________________________________________________


<PAGE>
		      P A R T  I.  FINANCIAL INFORMATION

Item 1.   Financial Statements

			COMPAQ COMPUTER CORPORATION
			 CONSOLIDATED BALANCE SHEET
				 (Unaudited)

				   ASSETS
						     September 30, December 31,
							 1996         1995
						       ---------   ------------
							    (in millions)
Current assets:
 Cash and cash equivalents                              $ 3,191      $   745
 Accounts receivable, net                                 2,828        3,141
 Inventories                                              1,489        2,156
 Deferred income taxes                                      364          365
 Prepaid expenses and other current assets                  124          120
							-------      -------
  Total current assets                                    7,996        6,527
Property, plant, and equipment,
 less accumulated depreciation                            1,174        1,110
Other assets                                                174          181
							-------      -------
							$ 9,344      $ 7,818
							=======      =======

		    LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                                       $ 1,882      $ 1,379
 Income taxes payable                                        95          190
 Other current liabilities                                1,306        1,111
							-------      -------
  Total current liabilities                               3,283        2,680
							-------      -------
Long-term debt                                              300          300
							-------      -------
Deferred income taxes                                       224          224
							-------      -------
Stockholders' equity:-
 Preferred stock, $.01 par value
  (authorized: 10 million shares; issued: none)
 Common stock and capital in excess of $.01 par value
  (authorized: 1 billion shares; issued and outstanding:
  270.8 million shares at September 30, 1996
  and 267.1 million shares at December 31, 1995)            962          890
 Retained earnings                                        4,575        3,724
							-------      -------
  Total stockholders' equity                              5,537        4,614
							-------      -------
							$ 9,344      $ 7,818
							=======      =======

	  See accompanying notes to consolidated financial data
<PAGE>
		   COMPAQ COMPUTER CORPORATION
	       CONSOLIDATED STATEMENT OF INCOME
			  (Unaudited)

				       Nine months      Quarter ended
					  ended
				      September 30,     September 30,
				      1996     1995     1996    1995
				    -------  -------   ------  ------
				 (in millions, except per share amounts)

Sales                               $12,687  $10,054   $4,481  $3,594
Cost of sales                         9,814    7,685    3,414   2,775
				    -------  -------   ------  ------
				      2,873    2,369    1,067     819
				    -------  -------   ------  ------

Selling, general, and
administrative expense                1,340    1,125      469     406
Research and development costs          302      189      105      65
Other income and expense, net            16       74       (6)      8
				    -------  -------   ------  ------
				      1,658    1,388      568     479
				    -------  -------   ------  ------
Income before provision for
income taxes                          1,215      981      499     340
Provision for income taxes              364      274      149      95
				    -------  -------   ------  ------
Net income                          $   851  $   707   $  350  $  245
				    =======  =======   ======  ======

Earnings per common and common
 equivalent share:
  Primary                           $  3.07  $  2.59   $ 1.26  $ 0.89
				    =======  =======   ======  ======
  Assuming full dilution            $  3.05  $  2.57   $ 1.25  $ 0.89
				    =======  =======   ======  ======
Shares used in computing
 earnings per common
 and common equivalent share:
  Primary                             277.1    272.8    278.4   275.2
				    =======  =======   ======  ======
  Assuming full dilution              278.8    274.5    279.1   275.2
				    =======  =======   ======  ======

		See accompanying notes to consolidated financial data
<PAGE>


			COMPAQ COMPUTER CORPORATION
		    CONSOLIDATED STATEMENT OF CASH FLOWS
				(Unaudited)


							  Nine months
						       ended September 30,
							 1996       1995
						       --------   --------
							   (in millions)
Cash flows from operating activities:
 Cash received from customers                          $12,860    $ 9,698
 Cash paid to suppliers and employees                   (9,731)    (8,459)
 Interest and dividends received                            57         35
 Interest paid                                             (67)       (83)
 Income taxes paid                                        (461)      (269)
						       --------   --------
  Net cash provided by operating activities              2,658        922
						       --------   --------
Cash flows from investing activities:
 Purchases of property, plant, and equipment, net         (281)      (288)
 Acquisition of businesses                                 (22)
 Other, net                                                 (8)        12
						       --------   --------
  Net cash used in investing activities                   (311)      (276)
						       --------   --------
Cash flows from financing activities:
 Issuance of stock pursuant to stock option plans           71         64
						       --------   --------
  Net cash provided by financing activities                 71         64
						       --------   --------
Effect of exchange rate changes on cash                     28        (61)
						       --------   --------
  Net increase in cash and cash equivalents              2,446        649
Cash and cash equivalents at beginning of period           745        471
						       --------   --------
Cash and cash equivalents at end of period             $ 3,191    $ 1,120
						       ========   ========

Reconciliation of net income to net cash
 provided by operating activities:
 Net income                                            $   851    $   707
  Depreciation and amortization                            203        160
  Provision for bad debts                                  106         23
  Deferred income taxes                                      1
  Exchange rate effect                                      11         28
  Decrease (increase) in accounts receivable               170       (372)
  Decrease (increase) in inventories                       668       (339)
  Increase in prepaid expenses and
   other current assets                                     (6)       (51)
  Increase in accounts payable                             505        684
  Increase (decrease) in income taxes payable              (94)        11
  Increase in other current liabilities                    243         71
						       --------   --------
   Net cash provided by operating activities           $ 2,658    $   922
						       ========   ========


	  See accompanying notes to consolidated financial data

<PAGE>

		     COMPAQ COMPUTER CORPORATION
		 NOTES TO CONSOLIDATED FINANCIAL DATA

Note 1 - Basis of presentation

The accompanying unaudited financial data as of September 30, 1996 and
December 31, 1995 and for the three month and nine month periods ended
September 30, 1996 and 1995 have been prepared on substantially the same
basis as the annual consolidated financial statements.  In the opinion of the
Company, the data reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the
results for those periods and the financial condition at those dates.

Note 2 - Inventories

Inventories consisted of the following components:

					   September 30,    December 31,
					       1996             1995
					     -------          -------
						   (in millions)

Raw materials and work-in-process            $   677          $ 1,043
Finished goods                                   812            1,113
					     -------          -------
					     $ 1,489          $ 2,156
					     =======          =======
Note 3 - Other income and expense

Other income and expense consisted of the following components:

					   Nine months     Three months
					      ended            ended
					  September 30,    September 30,
					   1996    1995     1996   1995
					  -----   -----    -----   -----
						   (in millions)

Interest and dividend income              $(57)   $(35)    $(33)   $(15)
Interest expense associated with hedging            14                3
Other interest expense                      60      58       23      21
Currency exchange (gains) losses, net       11      28        5      (5)
Other, net                                   2       9       (1)      4
					  -----   -----    -----   -----
					  $ 16    $ 74     $ (6)   $  8
					  =====   =====    =====   =====



Item 2.  Management's Discussion and Analysis of Financial Condition and 
Results of Operations

The following discussion should be read in conjunction with the consolidated 
interim financial statements.

Results of Operations

	The following table presents, as a percentage of sales, certain 
selected financial data for the nine months and quarters ended September 
30, 1996 and 1995. 


	       Nine months ended September 30, Quarter ended September 30,
			1996    1995                 1996    1995
	

Sales                  100.0%  100.0%               100.0%  100.0%
Cost of sales           77.3    76.4                 76.2    77.2
		       ______  ______               ______  ______
Gross margin            22.7    23.6                 23.8    22.8
Selling, general, and 
administrative expense  10.6    11.2                 10.5    11.3

Research and 
development costs        2.4     1.9                  2.4     1.8

Other income and 
expense, net              .1      .7                  (.2)     .2 
		       ______  ______               ______  ______
			13.1    13.8                 12.7    13.3
		       ______  ______               ______  ______
	
Income before provision 
for income taxes         9.6%    9.8%                11.1%   9.5%
		       ______  ______              ______  ______  

Sales

	Sales increased 25% and 26% in the third quarter and first 
nine months of 1996, respectively, over the comparable periods of 
1995, and 12% over the second quarter of 1996.  North American 
sales represented 59% and 54% of total sales in the third quarter and 
first nine months of 1996, respectively, as compared with 52% and 
49% in the corresponding periods of 1995.  European sales 
represented 29% and 32% of total sales in the third quarter and first 
nine months of 1996, respectively, as compared with 32% and 36% in 
the corresponding periods of 1995.  Other international sales, 
excluding Canada, represented 12% and 14% of the total sales in the 
third quarter and first nine months of 1996 as compared with 16% and 
15% in the comparable periods of 1995.  The Company's increase in 
consolidated sales in the third quarter of 1996 in comparison to the 
same period of 1995 stemmed primarily from an increase in the 
number of units and options sold. Total computer sales in units 
increased 28% in the third quarter of 1996 over the comparable period 
of 1995.


Gross Margin

	Gross margin as a percentage of sales was 23.8% and 22.7% 
in the third quarter and first nine months of 1996, respectively, 
compared to 22.8% and 23.6% in the third quarter and first nine 
months of 1995, and 23.0% in the second quarter of 1996.  The 
increase in gross margin from the second quarter 1996 and from the 
third quarter 1995 primarily resulted from the introduction of 
significant new products at better margins, improvements in logistics, 
and better asset management.  The Company operates in a very 
aggressive pricing environment that will continue to put pressure on 
the Company's gross margins.  Despite this pressure, the Company 
expects that the combination of changes in product mix, reductions in 
the cost of materials, and higher margins on new products will allow 
the Company maintain its current gross margin levels for the 
remainder of 1996.


Operating Expenses

	The Company strives to manage total operating expenses in 
line with sales growth and gross margin levels.  The Company's 
selling, general, and administrative expense increased in amount while 
declining as a percentage of sales in the third quarter of 1996 as 
compared with the same period of 1995. The increase in expenses 
resulted from domestic and international selling expense associated 
with higher unit volumes as well as expense incurred in connection 
with the entry into new markets and the expansion of distribution 
channels.  The Company anticipates that in the remainder of 1996 
selling, general, and administrative expense will increase in amount as 
it supports significant new product introductions, steps up its 
advertising and promotion programs, expands into new markets, and 
increases its investment in the area of service and support, especially 
in support of its systems business.

	Research and development costs increased to 2.4% in the 
third quarter of 1996 compared to 1.8% in the corresponding period of 
1995. The Company is committed to continuing a significant research 
and development program and research and development costs are 
likely to increase for the remainder of the year.


Other Items

	Other income and expense in the third quarter of 1996 was 
income of $6 million. Interest income and interest expense in the third 
quarter was a net gain of $10 million compared to a net expense of $9 
million in the corresponding period of 1995.  The net interest income 
resulted primarily from higher interest income due to significantly 
higher cash balances.

	The translation gains and losses relating to the financial 
statements of the Company's international subsidiaries, net of 
offsetting gains and losses associated with hedging activities related to 
the net monetary assets of these subsidiaries, are included in other 
income and expense and were a net loss of $5 million in the third 
quarter of 1996, compared to a net gain of $5 million in the third 
quarter of 1995.


Provision for Income Taxes

	The Company estimates the effective tax rate for 1996 will be 
30%, a decline from 34% in 1995. The Company's tax rate in 1995 
increased from 26% in 1994 due to a non-tax deductible charge 
associated with the Company's acquisitions and a decline in the ratio 
of earnings derived from the Company's Singaporean manufacturing 
subsidiary to total earnings. The Company anticipates that the 
proportion of its Singaporean earnings will continue to decline in 
1996, bringing the rate to 30%. The Company's tax rate is heavily 
dependent upon the mix of earnings of its Singaporean manufacturing 
subsidiary due to this subsidiary's earnings not being subject to taxes 
in Singapore until August 2001 (with potential extension to August 
2004 if certain cumulative investment levels and other conditions are 
met) and the Company's decision to invest a portion of the 
undistributed earnings of this subsidiary indefinitely in operations 
outside the United States. These earnings would become subject to 
U.S. tax if they were actually or deemed to be remitted to the Company 
as dividends or if the Company should sell its stock in this subsidiary. 
As a result, the Company does not provide tax on these earnings, 
which lowers its effective tax rate. Should the Company choose to 
discontinue its permanent reinvestment policy, the Company's 
effective tax rate would increase at that time.


Liquidity and Capital Resources

	The Company's working capital increased to $4.7 billion at 
September 30, 1996, compared to $3.8 billion at December 31, 1995.

	The Company's cash and cash equivalents increased to $3.2 
billion at September 30, 1996, from $745 million at December 31, 
1995, primarily because of positive cash flow from operating activities 
and better management of costs, inventory, and accounts receivable.  
Accounts receivable decreased to $2.8 billion from $3.1 billion at 
December, 31, 1995, primarily as a result of lower sales in third 
quarter 1996 versus fourth quarter 1995 and better overall 
management of accounts receivable as evidenced by lower days sales 
outstanding.  Accounts payable increased to $1.9 billion at September 
30, 1996, from $1.4 billion at December 31, 1995, primarily as a result 
of material purchases to support higher anticipated sales in fourth 
quarter 1996.  Inventory decreased to $1.5 billion at September 30, 
1996, from $2.2 billion at December 31, 1995, as a result of better 
overall management of inventories.  Inventory turns increased to 9.0 at 
the quarter ending September 30, 1996 from 6.5 at the quarter ending 
December 31, 1995.

	Cash used in the third quarter of 1996 for the purchase of 
property, plant and equipment totaled $80 million. The Company 
estimates that capital expenditures for land, buildings, and equipment 
during the remainder of 1996 will be approximately $95 million. The 
Company has commitments for only a small portion of such amounts 
and the actual level of spending will depend on a variety of factors, 
including general economic conditions and the Company's business.

	The Company currently expects to fund expenditures for 
capital requirements as well as liquidity needs created by changes in 
working capital from a combination of available cash balances, 
internally generated funds, and financing arrangements. The Company 
from time to time may borrow funds for actual or anticipated funding 
needs or because it is economically beneficial to borrow funds for the 
Company's needs instead of repatriating funds in the form of dividends 
from its foreign subsidiaries.  The Company has a $1 billion 
syndicated credit facility, which will expire in October 2001, which 
was unused at September 30, 1996.  In October, the Company put in 
place a $500 million syndicated credit facility, which will expire in 
October 1997.  The Company has established a commercial paper 
program, supported by the syndicated credit facility, which was unused 
at September 30, 1996. In the U.S. and various international locations 
the Company has uncommitted bank lines of credit, of which $10 
million was outstanding at September 30, 1996. The Company 
believes that these sources of credit provide sufficient financial 
flexibility to meet future funding requirements. The Company 
continually evaluates the need to establish other sources of working 
capital and will pursue those it considers appropriate based upon 
Company needs and market conditions.


Factors That May Affect Future Results

	The Company participates in a highly volatile industry that is 
characterized by fierce industry-wide competition for market share 
resulting in aggressive pricing practices, continually changing 
customer demand patterns, growing competition from well-capitalized 
high technology and consumer electronics companies, and rapid 
technological development carried out in the midst of legal battles over 
intellectual property rights. In developing strategies to achieve 
continued increases in sales and operating profits, the Company 
anticipates the continued expansion of the computer market and 
spending on information technology.  In this environment the 
Company seeks profitable PC market share growth while expanding its 
product offerings in high-end servers, workstations, and networking 
and communications products and further developing its options 
business. The Company's operating results could be adversely affected 
should the Company be unable to anticipate customer demand 
accurately, to maintain short design cycles while meeting evolving 
industry performance standards, to manage its product transitions, 
inventory levels, and manufacturing processes efficiently, to distribute 
its products quickly in response to customer demand, to differentiate 
its products from those of its competitors, or to compete successfully in 
the markets for its new products. In accordance with the provisions of 
the Private Securities Litigation Reform Act of 1995, the cautionary 
statements set forth below identify important factors that could cause 
actual results to differ materially from the projected results contained 
in the forward-looking statements in this report.

Competitive Environment. The Company expects the PC market in 
1996 to expand in line with third party research organizations' 
forecasts of unit growth in the range of 17% to 20%.  The Company is 
putting in place programs and products focused on meeting market 
demand and gaining market share profitably. Competition for PC 
market share remains fierce with a large number of competitors vying 
for market share. Several of the Company's suppliers also manufacture 
and market PCs or motherboards, which contain the microprocessor 
and other internal operating components of the PC. In addition, a 
number of consumer electronics companies are entering the PC market 
as it expands into the consumer sector and consumer models expand 
multimedia features. Each of these companies may be willing to accept 
lower profit margins to win market share. 

Fourth Quarter Outlook. For the fourth quarter 1996, the Company is 
targeting sales above third quarter levels. This level of sales is 
dependent on continued strong demand across all customer segments 
and the availability of new products. The Company expects higher 
sales in combination with changes in product mix, reductions in the 
cost of materials, higher margins on new products, and ongoing 
expense controls to enable it to achieve fourth quarter earnings that 
exceed the same period of 1995 and third quarter 1996. The 
Company's ability to achieve targeted sales and earnings levels 
depends upon a number of competitive and market factors and is 
subject to the risks set forth in this report.

Gross Margin Pressures and Operating Expenses. In order to maintain 
or increase its market share, the Company must continue to price its 
products competitively, to design products at lower price points with 
attractive price/performance characteristics, and, from time to time, to 
use various incentive programs to increase sales. Some of these 
strategies lower the average sales price per unit and may cause 
declines in gross margin and profitability. Other sales incentives 
increase operating expenses and may lower profitability. To 
compensate for the impact of lower prices and sales incentives on its 
sales, gross margins, and profitability, the Company must increase 
unit shipments, aggressively reduce costs, maintain tight control over 
operating expenses, and continue to pursue gross-margin enhancing 
opportunities. Despite quarterly fluctuations, the Company remains 
focused on achieving gross margin between 23% and 24%.  The 
Company's ability to continue to achieve this gross margin target and 
to hold its operating expense as a percentage of sales at the current 
level in the remainder of the year and in 1997 depends upon a variety 
of competitive and market factors and is subject to the other risks set 
forth in this report.

Inventory. The Company anticipates that its inventory turns, which 
increased to 5.5 in 1995 from 5.2 in 1994, will continue to increase in 
1996. In the third quarter of 1996, the Company achieved inventory 
turns of 9.0 in comparison to 5.1 in the third quarter of 1995 as a 
result of improved product cycle management and other efficiencies 
accompanying the reengineering of certain internal processes.  In the 
event of a drop in worldwide demand for PC products, lower than 
anticipated demand for one or more of the Company's products, 
difficulties in managing product transitions, or component pricing 
movements that affect the value of raw material inventory, there could 
be an adverse impact on inventory, cash, and related profitability. 

Product Transitions. In the summer of 1996 the Company announced 
major new products in each of its product groups and the Company 
will continue to have rapid product transition cycles.  In each product 
transition cycle the Company confronts the risk of delays in production 
that could impact sales of its newer PCs while it manages the 
inventory of its older products and facilitates the sale of older Compaq 
inventory held by resellers. The Company provides currently for 
estimated product returns and price protection that may occur under 
programs the Company has with its resellers and under floor planning 
arrangements with third-party finance companies. To facilitate smooth 
product transitions, the Company carries out pricing actions and 
marketing programs to raise sales in reseller channels.  The success of 
the Company's product transition strategy depends upon a variety of 
competitive and market factors.  Should the Company be unable to sell 
its inventory of older products at anticipated prices or if dealers hold 
higher than expected amounts of inventory subject to price protection 
at the time of planned price reductions, there could be a resulting 
adverse impact on sales, gross margins, and profitability. In planning 
product transitions the Company evaluates the speed at which 
customers are likely to switch to newer products. The contrast between 
the prices of old and new products, which is related to component 
costs, is a critical variable in predicting customer decisions to move to 
the next generation of products. Technology transitions may occur 
more quickly or more slowly than anticipated based on pricing 
decisions by industry component suppliers, particularly microprocessor 
prices set by Intel Corporation. Because of the lead times associated 
with the Company's volume production, should the Company be 
unable to predict the rate of a product transition accurately, the 
Company's inventory levels, cash and profitability could be negatively 
affected. Forecasting demand for newly-introduced products is 
complicated by the availability of different product models, which may 
include various types of built-in peripherals and software, and the 
configuration requirements, such as language localization, in certain 
markets. As a result, while overall demand may be in line with the 
Company's projections and manufacturing implementation, local 
market variations can lead to differences between expected and actual 
demand and resulting delays in shipment, which can affect the 
Company's financial results.

Reengineering Implementation.  The Company continues to expand its 
manufacturing capacity as well as reengineer its internal processes to 
support continued growth.  During 1996 the Company continues to 
focus on making its business processes more efficient in order to 
increase customer satisfaction, improve productivity, and lower costs. 
In the event of a delay in reengineering implementation, there could be 
an adverse impact on inventory, cash, and related profitability. As the 
Company has grown, it has outstripped the ability of certain of its 
systems to support continued expansion. In connection with its 
reengineering efforts, the Company is moving many of its systems 
from a legacy environment of proprietary systems to client-server 
architectures. Should the Company's transition to new systems not 
occur in a smooth and orderly manner, the Company could experience 
disruptions in the operation of its business, which could have an 
adverse financial impact.

Alliance and Acquisition Strategy. Because of the rapid pace of 
technological advances in information technology, the Company must 
introduce on a timely basis new products offering competitive features 
that appeal to a wide variety of customers. The Company's product 
development efforts are centered on aggressively developing new areas 
in which the Company can differentiate its products and add value, 
focusing on innovative platform features, the integration of hardware 
and software, and new related products and services.  Because the 
Company's business now intersects with a number of areas in which 
other companies have significantly greater technological, marketing, 
and service expertise, the Company has focused on alliances with third 
parties that have complementary products and skills as well as 
acquisitions that target incremental business opportunities. The 
Company believes that its alliance and acquisition strategies enable it 
to provide best-in-class solutions while expanding its offerings of 
complementary products. Each of these approaches, however, carries 
significant risks. In its acquisition activities, the Company confronts 
significant challenges in retaining key employees and reconciling 
diverse corporate cultures, synchronizing product roadmaps and 
business processes, and integrating logistics, marketing, product 
development, and manufacturing operations to achieve greater 
efficiencies.  In developing business plans based on an alliance model, 
the Company must rely on the performance of third parties, many of 
whom may compete with the Company in other parts of their 
businesses. In addition, particularly in attempting to expand into 
offering full enterprise computing solutions for its customers through 
an alliance model, the Company competes against businesses that are 
vertically integrated and offer customers the convenience of dealing 
with only one vendor for their enterprise-wide systems. Customers' 
willingness to adopt the Company's more cost-effective solution will 
depend upon the reputation for reliability and support that it and its 
business allies earn in this area.

Technology Standards. Participants in the PC industry generally rely 
on the creation and implementation of technology standards to win the 
broadest market acceptance for their products. The Company must 
successfully manage and participate in the development of standards 
while continuing to differentiate its products in a manner valued by 
customers. While industry participants generally accept, and may 
encourage, the use of their intellectual property by third parties under 
license, when intellectual property owned by competitors or suppliers 
becomes accepted as an industry standard, the Company must obtain a 
license, purchase components utilizing such technology from the 
owners of such technology or their licensees, or otherwise acquire 
rights to use such technology, which could result in increased 
Company costs. In addition, delays in access to technology developed 
by competitors and suppliers could slow the Company's design and 
manufacture of components and subsystems that distinguish its 
products.

Supplier Issues. In managing production levels, product transitions, 
and developments in microprocessor and other component technology, 
the Company must develop and implement effective strategies that 
anticipate availability and pricing by suppliers as well as forecast 
customer demand for its products. The Company attempts to select 
suppliers that can provide sufficient and timely supplies of high 
quality material. There can be no assurance, however, that the 
Company will acquire sufficient supplies of components, including 
microprocessors, to deliver its products in volume in response to shifts 
in customer demand. Order lead times and cancellation requirements 
vary by supplier and component. Should the Company underestimate 
the component supplies needed to meet demand, the Company could 
be unable to meet customer demand. Should the Company 
overestimate the component supplies needed to meet customer 
demand, the Company's cash and profitability could be adversely 
affected. Many of the components used in the Company's products, 
particularly microprocessors and memory, experience steep price 
declines over their product lives. If the Company is unable to manage 
its purchases and utilization of such components efficiently to 
maintain low inventory levels immediately prior to major price 
declines, the Company could be unable to take immediate advantage of 
such declines to lower its product costs, which could adversely affect 
the Company's sales and gross margins. In addition, certain of the 
Company's products are manufactured by third-party original 
equipment manufacturers, which could fail to respond in a timely 
manner to the Company's purchase orders or could fail to meet the 
Company's quality standards. The Company attempts to maintain tight 
control over production by third-party original equipment 
manufacturers to ensure that these products comply with its standards 
and schedule.

Intellectual Property Infringement. Because of rapid technological 
changes in the computer industry, extensive patent and copyright 
coverage, and the rapid establishment of new copyright and patent 
rights, certain components of the Company's products designed by the 
Company or purchased from third parties may unknowingly infringe 
intellectual property rights of others. The Company believes, based in 
part on industry practices, that if any infringements do exist, the 
Company will be able to modify its products to avoid infringement, 
obtain components that do not infringe, or obtain licenses or rights to 
such intellectual property on terms not having a material adverse effect 
on the Company. There can be no assurance, however, that the 
Company will be able to ensure that component supplies or that the 
cost of components are not adversely affected by legal proceedings in 
which an adverse determination is made with respect to intellectual 
property rights of the Company or one of its suppliers. To minimize 
the impact of intellectual property claims by third parties, the 
Company pursues an active patent portfolio development plan.
 
Product Distribution. During the first three quarters of 1996 the 
Company continued to broaden its product distribution.  Offering its 
products in an increasing number of geographic locations and through 
a variety of distribution channels, including dealers, distributors, 
value-added resellers, mass merchandise stores, consumer electronic 
outlets, computer superstores, and mail order, requires the Company to 
increase its geographic presence and to provide increased levels of 
sales and support interface with customers. The Company is exploring 
with its resellers a variety of ways to market its products to different 
types of customers.  There can be no assurance, however, that the 
requisite service and support to ensure the success of the Company's 
operations in new locations or through new channels can be achieved 
in a cost effective manner, particularly with respect to the levels of 
service and support desired by customers to support systems products 
in enterprise-wide computing solutions. While the Company 
anticipates that its geographic expansion will continue and the number 
of outlets for its products will continue to increase in the remainder of 
1996 and in 1997, a reduction in the pace of this growth could affect 
sales and profitability. Geographic expansion, particularly the 
expansion of manufacturing operations in developing countries, such 
as Brazil and China, and the expansion of sales into economically and 
politically volatile areas such as China, Hong Kong, Latin America, 
and Eastern Europe, subject the Company to a number of economic 
and other risks, such as currency devaluation, expropriation, and 
financial instability among resellers in these regions.  The Company 
continues to evaluate its business operations in these regions and 
attempts to take measures to limit its risks in these areas.

Credit Risks. The Company's primary means of distribution remains 
third-party resellers. The Company continuously monitors and 
manages the credit it extends to resellers and attempts to limit credit 
risks by broadening its distribution channels, utilizing certain risk 
transfer instruments, and obtaining security interests in property 
owned by its debtors.  The Company's business could be adversely 
affected in the event that the financial condition of third-party 
computer resellers worsens. Upon the financial failure of a major 
reseller, the Company could experience disruptions in its distribution 
as well as the loss of the unsecured portion of any outstanding 
accounts receivable. The Company generally has experienced longer 
accounts receivable cycles in its emerging markets, in particular China 
and Latin America, when compared to its U.S. and European markets. 
In the event that accounts receivable cycles in these developing 
markets lengthen further or one or more of the Company's larger 
resellers in these regions fail, the Company could be adversely 
affected.

Currency and Hedging Risks. The value of the U.S. dollar continues to 
affect the Company's financial results. The functional currency for the 
Company's international subsidiaries is the U.S. dollar. When the U.S. 
dollar strengthens against other currencies, sales made in those 
currencies translate into lower sales in U.S. dollars; and when the U.S. 
dollar weakens, sales made in local currencies translate into higher 
sales in U.S. dollars. Correspondingly, costs and expenses incurred in 
non-U.S. dollar currencies increase when the U.S. dollar weakens and 
decline when the U.S. dollar strengthens. Accordingly, changes in 
exchange rates may positively or negatively affect the Company's sales 
(as expressed in U.S. dollars), gross margins, and operating expenses, 
and the Company's results of operations can be significantly affected 
in the short term by fluctuations in foreign currency exchange rates. 
The Company engages in hedging programs aimed at limiting in part 
the impact of currency fluctuations. Through these programs, the 
Company hedges its non-U.S. dollar net monetary assets primarily 
through the use of forward exchange contracts. For certain of its 
markets, particularly Latin America, the Company has determined that 
ongoing hedging of its non-U.S. dollar net monetary assets is not cost 
effective and instead attempts to minimize currency exposure risk 
through working capital management. There can be no assurance that 
such an approach will be successful, especially in the event of a 
significant and sudden decline in the value of local currencies. From 
time to time the Company purchases foreign currency option contracts 
as well as short-term forward exchange contracts to protect against 
currency exchange risks associated with the anticipated sales of its 
international marketing subsidiaries, principally in Europe and Japan. 
These instruments provide only limited protection against currency 
exchange risks. The Company varies the percentage of anticipated 
sales that it attempts to protect against currency exchange risks based 
upon its judgment of currency markets and the costs of these 
instruments, and in some markets, particularly in developing areas, 
the Company's ability to utilize such instruments is limited. If the 
Company overestimates the hedging amount needed to protect 
anticipated sales during a period in which the dollar weakens or 
underestimates the hedging amount during a period when the dollar 
strengthens, the Company could incur expense that would not be 
balanced by the impact of exchange rate movements on its sales.  All 
currency contracts that are entered into by the Company are 
components of its hedging programs and are entered into for the sole 
purpose of hedging an existing or anticipated currency exposure, not 
for speculation. Although the Company maintains these programs to 
reduce the impact of changes in currency exchange rates, when the 
U.S. dollar sustains a strengthening position against currencies in 
which the Company sells its products or a weakening exchange rate 
against currencies in which the Company incurs costs, particularly the 
Japanese yen, the Company's sales or its costs are adversely affected.

Tax Rate. The Company's tax rate is heavily dependent upon the 
proportion of earnings that are derived from its Singaporean 
manufacturing subsidiary and its ability to reinvest those earnings 
permanently outside the U.S. If the earnings of this subsidiary as a 
percentage of the Company's total earnings were to decline 
significantly from anticipated levels, or should the Company's ability 
to reinvest these earnings be reduced, the Company's tax rate would 
increase above the estimated 30%. In addition, should the Company's 
intercompany transfer pricing with respect to its Singaporean 
manufacturing subsidiary require significant adjustment due to audits 
or regulatory changes, the Company's overall tax rate could increase.

Seasonality. General economic conditions have an impact on the 
Company's business and financial results. From time to time the 
markets in which the Company sells its products experience weak 
economic conditions that may negatively affect sales of the Company's 
products. Although the Company does not consider its business to be 
highly seasonal, it has experienced seasonally higher sales and 
earnings in the fourth quarter of the year. The continued expansion of 
its retail business is likely to result in the increased seasonality of the 
Company's business, particularly in the fourth quarter of the year, and 
its financial results being more dependent on retail business 
fluctuations.

	Because of the foregoing factors, as well as other variables 
affecting the Company's operating results, past financial performance 
should not be considered a reliable indicator of future performance, 
and investors should not use historical trends to anticipate results or 
trends in future periods. In addition, the Company's participation in a 
highly dynamic industry often results in significant volatility of the 
Company's common stock price.


			 P A R T  II.  OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

(a)     Exhibit No.     Description

	3.1             Restated Certificate of Incorporation of Registrant

	11              Statement regarding computation of per share earnings

	27              EDGAR financial data schedule

(b)     Report on Form 8-K dated October 17, 1996, containing the Company's 
news release dated October 17, 1996, with respect to its financial results 
for the period ended September 30, 1996.
	
All other items specified by Part II of this report are inapplicable and 
accordingly have been omitted.


				   SIGNATURES

	Pursuant to the requirements of the Securities Exchange Act 
of 1934, the registrant has duly caused this report to be signed on its 
behalf by the undersigned thereunto duly authorized.

	November 1, 1996            Compaq Computer Corporation


				       /s/    EARL L. MASON
		       ----------------------------------------------------
				       Earl L. Mason, Senior Vice President,
				       Finance, and Chief Financial Officer
				       (as authorized officer and as 
				       principal financial officer)