SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q



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



                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998



                          COMMISSION FILE NUMBER 1-9026



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


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


                       20555 SH 249, HOUSTON, TEXAS 77070
                                 (281) 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,  1998,  was  approximately  1.7  billion.

<PAGE>
                         PART I.  FINANCIAL INFORMATION

ITEM  1.  FINANCIAL  STATEMENTS

<TABLE>
<CAPTION>
                           COMPAQ COMPUTER CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)


                            ASSETS
                                                           SEPTEMBER 30,  DECEMBER 31,
                                                                  1998     1997
                                                           ------------  -------------
                                                                 (IN MILLIONS)
<S>                                                            <C>        <C>
Current  assets:
 Cash and cash equivalents                                     $  4,408   $ 6,418
 Short-term investments                                              22       344
 Accounts receivable, net                                         5,727     2,891
 Inventories                                                      2,123     1,570
 Deferred income taxes                                            1,981       595
 Other current assets                                               509       199
                                                               ---------  -------
   Total current assets                                          14,770    12,017
Property, plant and equipment, less accumulated depreciation      2,822     1,985
Deferred income taxes                                               862         -
Intangible and other assets                                       3,193       629
                                                               ---------  -------
                                                               $ 21,647   $14,631
                                                               =========  =======


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                                              $  3,779   $ 2,837
 Income taxes payable                                               210       195
 Accrued restructuring costs                                      1,634         -
 Other current liabilities                                        4,733     2,170
                                                               ---------  -------
   Total current liabilities                                     10,356     5,202
                                                               ---------  -------
Postretirement and other postemployment benefits                    430         -
                                                               ---------  -------
Minority interest                                                   422         -
                                                               ---------  -------
Stockholders' equity:
 Preferred stock, $.01 par value
   (authorized: 10 million shares; issued: none)                      -         -
 Common stock and capital in excess of $.01 par value
   (authorized: 3 billion shares; issued:
   1,683 million shares at September 30, 1998 and
   1,519 million shares at December 31, 1997)                     6,881     2,096
 Retained earnings                                                3,766     7,333
 Treasury stock (at cost)                                          (208)        -
                                                               ---------  -------
   Total stockholders' equity                                    10,439    9,429
                                                               ---------  -------
                                                               $ 21,647   $14,631
                                                               =========  =======
</TABLE>

             See accompanying notes to consolidated financial data.

                                        2
<PAGE>
<TABLE>
<CAPTION>
                              COMPAQ COMPUTER CORPORATION
                            CONSOLIDATED STATEMENT OF INCOME
                                      (UNAUDITED)

                                                    NINE MONTHS ENDED    QUARTER  ENDED
                                                       SEPTEMBER 30,      SEPTEMBER 30,
                                                  ---------------------  --------------
                                                      1998       1997    1998    1997
                                                  -----------  --------  -----  -------
                                                  (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S>                                               <C>         <C>       <C>     <C>
Revenue:
 Products                                         $   18,227  $ 16,926  $7,280  $6,353
 Services                                              2,083       335   1,511     121
                                                  -----------  --------  -----  -------
Total revenue                                         20,310    17,261   8,791   6,474
                                                  -----------  --------  -----  -------

Cost of sales:
 Products                                             14,576    12,285   5,569   4,608
 Services                                              1,416       245   1,037      89
                                                  -----------  --------  -----  -------
Total cost of sales                                   15,992    12,530   6,606   4,697
                                                  -----------  --------  -----  -------

Selling, general, and administrative expense           3,417     2,097   1,581     788
Research and development costs                           924       600     430     213
Purchased in-process technology                        3,234       208       -       -
Restructuring and asset impairment charges               393         -       -       -
Merger-related costs                                       -        44       -      44
Other income and expense, net                            (56)      (23)     18      (4)
                                                  -----------  --------  -----  -------
                                                       7,912     2,926   2,029   1,041
                                                  -----------  --------  -----  -------

Income (loss) before provision for income taxes       (3,594)    1,805     156     736
Provision (benefit) for income taxes                     (93)      617      41     219
                                                  -----------  --------  -----  -------
Net income (loss)                                 $   (3,501)  $ 1,188  $  115  $  517
                                                  ===========  ========  =====  =======


Earnings (loss) per common share:
 Basic                                            $    (2.21)  $  0.79  $ 0.07  $ 0.34
                                                  ===========  ========  =====  =======
 Diluted                                          $    (2.21)  $  0.76  $ 0.07  $ 0.33
                                                  ===========  ========  =====  =======


Shares used in computing earnings (loss) per
common share:
 Basic                                                 1,585     1,502   1,675   1,510
                                                  ===========  ========  =====  =======
 Diluted                                               1,585     1,557   1,737   1,579
                                                  ===========  ========  =====  =======
</TABLE>

             See accompanying notes to consolidated financial data.

                                        3
<PAGE>
<TABLE>
<CAPTION>
                            COMPAQ COMPUTER CORPORATION
                        CONSOLIDATED STATEMENT OF CASH FLOWS
                                    (UNAUDITED)

                                                          NINE MONTHS ENDED SEPTEMBER 30,
                                                          -------------------------------
                                                                  1998       1997 
                                                               ----------  --------
                                                                   (IN MILLIONS)
<S>                                                            <C>         <C>
Cash flows from operating activities:
   Net income (loss)                                           $  (3,501)  $ 1,188
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
 Depreciation and amortization                                       557       386
 Purchased in-process technology                                   3,234       208
 Restructuring and asset impairment charges                          393         -
 Changes in operating assets and liabilities, net of
 effects of purchased businesses:
 Accounts receivable                                                (490)      679
 Inventories                                                         724      (721)
 Other current assets                                                 95       (32)
 Accounts payable                                                    152       920
 Income taxes payable                                               (137)       51
 Accrued restructuring costs                                        (110)        -
 Other current liabilities                                          (217)      121
                                                               ----------  --------
   Net cash provided by operating activities                         700     2,800
                                                               ----------  --------
Cash flows from investing activities:
 Purchases of property, plant and equipment, net                    (470)     (462)
 Proceeds from sales of short-term investments, net                  322       (45)
 Acquisition of businesses, net of cash acquired                  (1,413)     (268)
 Other, net                                                         (361)      (13)
                                                               ----------  --------
   Net cash used in investing activities                          (1,922)     (788)
                                                               ----------  --------
Cash flows from financing activities:
 Payments to retire debt                                            (788)     (299)
 Purchase of treasury shares                                        (208)        -
 Issuance of common stock pursuant to stock option plans             260       124
 Dividends paid                                                      (71)        -
 Other, net                                                           (1)      (46)
                                                               ----------  --------
   Net cash used in financing activities                            (808)     (221)
                                                               ----------  --------
Effect of exchange rate changes on cash and cash equivalents          20        1
                                                               ----------  --------
 Net (decrease) increase in cash and cash equivalents             (2,010)    1,792
Cash and cash equivalents at beginning of period                   6,418     3,048
                                                               ----------  --------
Cash and cash equivalents at end of period                     $   4,408   $ 4,840
                                                               ==========  ========
</TABLE>

             See accompanying notes to consolidated financial data.

                                        4
<PAGE>
<TABLE>
<CAPTION>
             COMPAQ COMPUTER CORPORATION
   CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
                     (UNAUDITED)

                         SUPPLEMENTAL CASH FLOW INFORMATION
                           NINE MONTHS ENDED SEPTEMBER 30,
                           -------------------------------
                                   1998       1997
                                ----------  -------
                                    (IN MILLIONS)
<S>                              <C>         <C>
Acquisitions (Note 2)
Fair value of:
 Assets acquired                 $  16,029   $  362
 Liabilities assumed                (7,014)     (74)
 Stock issued                       (4,284)       -
 Options issued                       (249)     (10)
                                 ----------  -------
Cash paid                            4,482      278
Less: cash acquired                 (3,069)     (10)
                                 ----------  -------
Net cash paid for acquisitions   $   1,413   $  268
                                 ==========  =======
</TABLE>

             See accompanying notes to consolidated financial data.

                                        5
<PAGE>
                           COMPAQ COMPUTER CORPORATION
                      NOTES TO CONSOLIDATED FINANCIAL DATA

NOTE  1  -  BASIS  OF  PRESENTATION
-----------------------------------

     The  accompanying unaudited consolidated financial data for Compaq Computer
Corporation  ("Compaq")  as  of September 30, 1998 and December 31, 1997 and for
the  three  and  nine-month  periods ended September 30, 1998 and 1997 have been
prepared  on  substantially  the  same  basis  as  Compaq's  annual consolidated
financial  statements.  In  Compaq's opinion, the data reflects 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.  Certain  prior  year amounts have been reclassified to conform to
current  year  presentation.


     Compaq  completed  the  acquisition  of  Digital  Equipment  Corporation
("Digital")  during  the second quarter of 1998.  This acquisition was accounted
for under the purchase method of accounting.  The financial information provided
for  the  three-month  and  nine-month periods ended September 30, 1997 has been
restated  to  reflect the acquisition of Tandem Computers Incorporated in August
1997,  which  was  accounted  for  as  a  pooling  of  interests.

NOTE  2  -  ACQUISITION  OF  DIGITAL
------------------------------------

     On  June  11, 1998, Compaq consummated its acquisition of Digital.  Digital
was  an  industry  leader  in  implementing  and  supporting  networked business
solutions  in multi-vendor environments based on high performance platforms with
an established global service and support team.  The aggregate purchase price of
$9.1  billion  consisted  of approximately $4.5 billion in cash, the issuance of
approximately  141 million shares of Compaq common stock valued at approximately
$4.3  billion  and  the issuance of approximately 25 million options to purchase
Compaq common stock valued at approximately $249 million.  The cash component of
the purchase price was paid through the use of Compaq's general corporate funds.
The  results of operations of Digital and the estimated fair value of the assets
acquired  and  liabilities assumed are included in Compaq's financial statements
from  the  date  of  acquisition.


     The  purchase  price was preliminarily allocated to the assets acquired and
liabilities  assumed  based  on  Compaq's  estimates  of  fair value.  Compaq is
awaiting  additional  information  related  to  the fair value of certain assets
acquired  and  liabilities  assumed  and the finalization of the Digital-related
restructuring  plans.  Management  does  not  expect  the  finalization of these
matters  to  have  a material effect on the purchase price allocation.  The fair
value  assigned  to intangible assets acquired was based on a valuation prepared
by  an  independent  third-party  appraisal  company  and  consists of purchased
in-process  technology,  proven research and development, the installed customer
base  and  trademarks.  The  amounts allocated to tangible and intangible assets
acquired  less  liabilities assumed exceeded the purchase price by approximately
$4.1 billion.  This excess value over the purchase price was allocated to reduce
proportionately the values assigned to long-term assets and purchased in-process
technology in determining their ultimate fair values.  As a result of the change
in  fair  values  of the long-term assets, the deferred tax liability associated
with  these  assets  was  also  adjusted.

                                        6
<PAGE>
NOTE  2  -  ACQUISITION  OF  DIGITAL  (CONTINUED)
-------------------------------------------------

     The  following  table  shows the amounts allocated to the long-term assets,
the  allocation  of  the  excess value over the purchase price and the resulting
assigned  values  for  the  assets  acquired  as  of  June  11,  1998:

<TABLE>
<CAPTION>
                                                 EXCESS VALUE    VALUE ASSIGNED
                                    INITIAL     OVER PURCHASE    TO NET ASSETS
BALANCE SHEET CATEGORY             VALUATION        PRICE          ACQUIRED
                                  -----------  ---------------  ----------------
<S>                               <C>          <C>              <C>
Property, plant and equipment     $    1,465   $         (637)  $           828
Purchased in-process technology        5,722           (2,488)            3,234
Intangible assets:
 Proven research and development       1,055             (459)              596
 Installed customer base               2,150             (935)            1,215
 Trademarks                              391             (170)              221
Other assets                             662             (288)              374
Deferred tax liability                (1,073)             871              (202)
</TABLE>

     Management  estimates  that  $3.2  billion of the purchase price represents
purchased  in-process  technology  that  has  not  yet  reached  technological
feasibility  and  has  no  alternative future use.  Accordingly, this amount was
immediately  expensed  in the Consolidated Statement of Income upon consummation
of  the  acquisition.  The  value  assigned  to purchased in-process technology,
based  on  a valuation prepared by an independent third-party appraisal company,
was determined by identifying research projects in areas for which technological
feasibility has not been established, including UNIX/Open VMS ($1.6 billion), NT
Systems  ($800  million),  storage  ($2.7 billion) and Internet and others ($600
million).  The  value  was  determined  by  estimating  the costs to develop the
purchased  in-process  technology  into commercially viable products, estimating
the  resulting  net  cash flows from such projects, and discounting the net cash
flows  back  to  their  present value.  The discount rate includes a factor that
takes into account the uncertainty surrounding the successful development of the
purchased  in-process  technology.  If  these  projects  are  not  successfully
developed, future revenue and profitability of Compaq may be adversely affected.
Additionally, the value of other intangible assets acquired may become impaired.

     Upon  consummation  of the Digital acquisition, Compaq also assumed certain
of  Digital's  defined  benefit  and  defined  contribution  plans.  The Digital
employees  who  were eligible to participate in the Digital plans at the time of
the  acquisition  continue  to  be  eligible to participate in these plans.  The
benefits  generally  are  based  on years of service and compensation during the
employee's  career.  Pension  cost  is  based  on  estimated  benefit  formulas.

     Additionally,  Compaq assumed the defined benefit postretirement plans that
provide  medical  and  dental benefits for Digital's retirees and their eligible
dependents  in the U.S and certain other locations.    The majority of Digital's
non-U.S.  subsidiaries  do not offer postretirement benefits other than pensions
to  retirees.

     The following table represents unaudited consolidated pro forma information
as  if  Compaq  and Digital had been combined as of the beginning of the periods
presented.  The  pro  forma data is presented for illustrative purposes only and
is  not  necessarily indicative of the combined financial position or results of
operations  of  future  periods or the results that actually would have occurred
had  Compaq  and  Digital  been a combined company during the specified periods.
The  pro  forma  combined  results  include  the  effects  of the purchase price
allocation  on  depreciation  of  property, plant and equipment and amortization

                                        7
<PAGE>
NOTE  2  -  ACQUISITION  OF  DIGITAL  (CONTINUED)
-------------------------------------------------

of  intangible  assets,  adjustments  to reflect the reversal of interest income
resulting  from  the  use  of  cash  related  to the acquisition of Digital, and
preferred  stock  dividends  paid.  The  pro  forma  combined  results  exclude
acquisition-related  charges  for  purchased  in-process  technology  related to
Digital.

<TABLE>
<CAPTION>
                                               NINE MONTHS ENDED SEPTEMBER 30,
                                                        1998      1997
                                                      ---------  -------
                                                     PRO FORMA UNAUDITED
                                           (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S>                                                   <C>        <C>
Revenue:
 Products                                             $ 20,830   $22,338
 Services                                                4,757     4,660
                                                      ---------  -------
   Total revenue                                      $ 25,587   $26,998
                                                      ---------  -------

Net income (loss)                                     $   (421)  $ 1,163
                                                      =========  =======


Earnings (loss) per common share:
 Basic                                                $  (0.25)  $  0.71
                                                      =========  =======
 Diluted                                              $  (0.25)  $  0.68
                                                      =========  =======


Shares used in computing earnings per common share:
 Basic                                                   1,670     1,643
                                                      =========  =======
 Diluted                                                 1,670     1,698
                                                      =========  =======
</TABLE>

The  net  loss  for  the  nine  months  ended  September 30, 1998, includes $291
million,  net of tax, in restructuring and asset impairment charges as described
in  Note  3  to  the  Consolidated  Financial  Data.

NOTE  3  -  RESTRUCTURING  AND  ASSET  IMPAIRMENT  CHARGES
----------------------------------------------------------

     In  June  1998,  Compaq's  management  approved  restructuring plans, which
included  initiatives  to  integrate  the  operations  of  Compaq  and  Digital,
consolidate  duplicative  facilities,  improve  service  delivery  and  reduce
overhead.  Total  accrued  restructuring  costs of $1.7 billion were recorded in
the  second  quarter related to these initiatives, $1.4 billion of which related
to  Digital and was recorded as a component of the purchase price allocation and
$286  million  of which related to Compaq, which was charged to operations.  The
amounts  recorded related to Digital are based on management's estimate of those
costs.  Management  expects  the  Digital restructuring plans to be finalized by
the  end of the year.  Areas where management estimates may be revised primarily
relate  to  Digital  employee  separation and relocation costs, facility closure
costs  and other exit costs.  Adjustments to accrued restructuring costs related
to  Digital  will be recorded as an adjustment to the preliminary purchase price
allocation.

     Accrued  restructuring  costs  recorded  in June 1998 included $1.1 billion
($999  million for Digital and $132 million for Compaq) representing the cost of
involuntary  employee  separation  benefits  related  to  approximately  19,700
employees  worldwide  (approximately  14,700  Digital employees and 5,000 Compaq
employees).  Employee  separation  benefits include severance, medical and other
benefits.  Employee  separations will affect the majority of business functions,
job  classes  and  geographies,  with  a majority of the reductions occurring in
North  America and Europe.  The restructuring plans also included costs totaling
$414  million  ($272  million  related  to  Digital  and $142 million related to
Compaq)

                                        8
<PAGE>
NOTE  3  -  RESTRUCTURING  AND  ASSET  IMPAIRMENT  CHARGES  (CONTINUED)
-----------------------------------------------------------------------

associated  with the closure of 13.2 million square feet of office, distribution
and  manufacturing  space,  principally  in  North  America  and  Europe.

Other  restructuring  costs  included  $99  million related to the relocation of
Digital  employees, with the majority of this amount attributable to relocations
occurring  in  North  America  and Europe, and $100 million primarily related to
costs  of  terminating  certain Digital contractual obligations.  Compaq expects
that most of the restructuring actions related to the plans will be completed by
June  1999.

     The  accrued  restructuring costs and amounts charged against the provision
as  of  September  30,  1998,  were  as  follows  (dollars  in  millions):

<TABLE>
<CAPTION>
                                                            BEGINNING      CASH       REMAINING
                                    COMPAQ      DIGITAL      ACCRUAL    EXPENDITURES   ACCRUAL
                                   --------  -------------  ----------  ------------  ---------
<S>                                <C>       <C>            <C>         <C>           <C>
Employee separations               $    132  $         999  $    1,131  $       (86)  $   1,045
Facility closure costs                  142            272         414          (23)        391
Relocation                                -             99          99            -          99
Other exit costs                         12             88         100           (1)         99
                                   --------  -------------  ----------  ------------  ---------
Total accrued restructuring costs  $    286  $       1,458  $    1,744  $      (110)  $   1,634
                                   ========  =============  ==========  ============  ==========
Number of employee separations
     due to restructuring actions                                             4,603
                                                                        ============
</TABLE>

     The total net headcount reduction for the quarter ended September 30, 1998,
including  attrition,  restructuring  and  selective  hiring,  was approximately
5,400.

     During  the  second  quarter  of  1998, Compaq also recorded a $107 million
charge  related  to  asset impairments.  The asset impairments resulted from the
writedown  to  fair  market  value,  less costs to sell, for assets taken out of
service  and  held for sale or disposal.  The majority of this charge relates to
the  impairment  of  $74  million  of  intangible  assets  associated  with  the
acquisition  of a company during 1995 that developed, manufactured, and supplied
fast  ethernet  hubs,  switches  and  related products.  In May 1998, management
decided  to  close  the  manufacturing  facility  and  abandon  the technologies
acquired  through  this  acquisition  and  discontinue  all  related  products.

                                        9
<PAGE>
NOTE  4  -  CERTAIN  BALANCE  SHEET  COMPONENTS
-----------------------------------------------

<TABLE>
<CAPTION>
                                        SEPTEMBER 30,  DECEMBER 31,
                                            1998        1997
                                       --------------  ------------
                                              (IN MILLIONS)
<S>                                    <C>             <C>
INVENTORIES:
 Raw materials and work-in-process     $          936  $        767
 Finished goods                                 1,187           803
                                       --------------  ------------
                                       $        2,123  $      1,570
                                       ==============  ============


INTANGIBLES AND OTHER ASSETS:
 Installed customer base, net          $        1,191  $          -
 Proven research and development, net             561             -
 Trademarks, net                                  209             3
 Other assets, net                              1,232           626
                                       --------------  ------------
                                       $        3,193  $        629
                                       ==============  ============


OTHER CURRENT LIABILITIES:
 Salaries, wages and related items     $          656  $        123
 Deferred revenue                                 908            31
 Accrued warranty                                 678           423
 Accrued royalties                                198           132
 Other accrued liabilities                      2,293         1,461
                                       --------------  ------------
                                       $        4,733  $      2,170
                                       ==============  ============
</TABLE>

     The  estimated  lives  of  installed  customer  base,  proven  research and
development,  and  trademarks  are  15 years, 5 years and 5 years, respectively.

NOTE  5  -  TENDER  OFFER  FOR  NOTES  AND  DEBENTURES
------------------------------------------------------

     In  June  1998,  Compaq  completed  a  cash  tender  offer for Digital debt
securities  with  a  fair  value  of  $879  million, including accrued interest.
Compaq  paid  an  aggregate of $799 million (including accrued interest) for the
notes  and  debentures  tendered.  The  untendered  balance  of  the  notes  and
debentures  is  included  in  other  current  liabilities.

NOTE  6  -  TREASURY  STOCK
---------------------------

     On  April  23,  1998,  the Board of Directors authorized a systematic stock
repurchase program to acquire up to 100 million shares of Compaq's common stock.
Compaq  implemented  this  program  in  May  1998.  Compaq  has  repurchased
approximately  6.4  million  shares  through  September  30, 1998, for a cost of
approximately  $208  million  under  this  program.

                                       10
<PAGE>
NOTE  7  -  OTHER  INCOME  AND  EXPENSE
---------------------------------------

     Other  income  and  expense  consisted  of  the  following:

<TABLE>
<CAPTION>
                                      NINE MONTHS ENDED   QUARTER ENDED
                                        SEPTEMBER 30,     SEPTEMBER 30,
                                      -----------------  ----------------
                                        1998      1997     1998     1997
                                      --------  --------  -------  -------
                                                  (IN MILLIONS)
<S>                                   <C>       <C>       <C>      <C>
Interest and dividend income          $  (226)  $  (189)  $  (55)  $  (63)
Interest (income) expense associated        8        (4)       6       (1)
 with hedging
Other interest expense                    120       118       45       46
Currency losses, net                       19        21       21        9
Minority interest dividend                 10         -        9        -
Other, net                                 13        31       (8)       5
                                      --------  --------  -------  -------
                                      $   (56)  $   (23)  $   18   $   (4)
                                      ========  ========  =======  =======
</TABLE>

NOTE  8  -  COMPREHENSIVE  INCOME
---------------------------------

     Comprehensive  income (loss) is comprised of two components: net income and
other  comprehensive  income.  Other  comprehensive  income  refers to revenues,
expenses,  gains  and losses that under generally accepted accounting principles
are  recorded  as  an  element of stockholders' equity and are excluded from net
income.  Compaq's  other  comprehensive income is comprised primarily of foreign
currency  translation  adjustments  from  certain  subsidiaries.  Comprehensive
income  for  the nine months ended September 30, 1998 and 1997, respectively, is
insignificant  and therefore is not disclosed in the balance sheet as a separate
component  of  stockholders'  equity.  The  components  of  comprehensive income
(loss)  are  listed  below:

<TABLE>
<CAPTION>
                                    NINE MONTHS ENDED   QUARTER ENDED
                                      SEPTEMBER 30,     SEPTEMBER 30,
                                   -------------------  ------------
                                      1998      1997    1998   1997
                                   ----------  -------  ----  ------
                                               (IN MILLIONS)
<S>                                <C>         <C>      <C>   <C>
Net income (loss)                  $  (3,501)  $1,188  $ 115  $ 517
Other comprehensive income (loss)          3      (19)     8     (6)
                                   ----------  -------  ----  ------
Comprehensive income (loss)        $  (3,498)  $1,169  $ 123  $ 511
                                   ==========  =======  ====  ======
</TABLE>

NOTE  9  -  EARNINGS  PER  COMMON  SHARE
----------------------------------------

     Basic  earnings  per  common  share  is computed using the weighted average
number  of  shares  outstanding  during the period.  Diluted earnings per common
share  is  computed  using  the  weighted  average  number of shares outstanding
adjusted  for  the dilutive incremental shares attributed to outstanding options
to  purchase common stock.  Diluted loss per share is based only on the weighted
average  number  of  shares  outstanding  during the period.  Incremental common
stock  equivalent  shares  of 62 million were used in the calculation of diluted
earnings per common share for the quarter ended September 30, 1998.  Incremental
common stock equivalent shares of 61 million were not used in the calculation of
diluted loss per common share in the nine months ended September 30, 1998, since
their inclusion would have been antidilutive due to the net loss for the period.
Incremental  common  stock  equivalent  shares of 55 million and 69 million were
used  in  the  calculation  of diluted earnings per common share in the nine and
three  months  ended  September  30,  1997,  respectively.

     Stock options to purchase 13 million shares and 37 million shares of common
stock for the nine-month periods, and 16 million shares and 12 million shares of
common  stock  for  the  three-month  periods

                                       11
<PAGE>
NOTE  9  -  EARNINGS  PER  COMMON  SHARE  (CONTINUED)
-----------------------------------------------------

ended  September  30,  1998  and  1997,  respectively,  were outstanding but not
included  in  the  computation  of diluted earnings per common share because the
option  exercise  price  was greater than the average market price of the common
shares,  and  therefore,  the  effect  would  be  antidilutive.

NOTE  10  -  LITIGATION
-----------------------

     Five  class  action  lawsuits have been filed in the United States District
Court  for  the  Southern  District of Texas, Houston Division.  The actions are
purported  class  actions  of all persons who purchased Compaq common stock from
July  10,  1997  through  March  6,  1998,  and the named defendants include the
Company  and  certain  of  its  current  and former officers and directors.  The
complaints  allege  that the defendants violated Sections 10(b) and 20(a) of the
Securities  Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by, among
other  things,  withholding  information  and making misleading statements about
channel  inventory  and  factoring of receivables in order to inflate the market
price  of  Compaq's  common  stock,  and  further  alleges  that  certain of the
individual  defendants  sold  Compaq  common  stock at these inflated prices.  A
motion  for  the  appointment  of  lead  counsel  and  the  consolidation of the
purported  class  action  lawsuits  is  pending.  The  plaintiffs  seek monetary
damages,  interest,  costs  and  expenses.  Compaq  intends  to defend the suits
vigorously.

     Several  purported  class action lawsuits were filed against Digital during
1994  alleging  violations  of  the federal securities laws arising from alleged
misrepresentations  and omissions in connection with Digital's issuance and sale
of  Series  A  8-7/8% Cumulative Preferred Stock and Digital's financial results
for  the  quarter  ended  April  2,  1994.  During  1995,  the  lawsuits  were
consolidated  into  three  cases,  which  were  pending before the United States
District  Court  for  the  District  of  Massachusetts.  On  August 8, 1995, the
Massachusetts  federal court granted the defendants' motion to dismiss all three
cases in their entirety.  On May 7, 1996, the United States Court of Appeals for
the  First Circuit affirmed in part and reversed in part the dismissal of two of
the  cases,  and  remanded  for further proceedings.  The parties are proceeding
with  discovery.

NOTE  11  -  DIGITAL  SUMMARIZED  UNAUDITED  FINANCIAL  INFORMATION  (DIGITAL
-----------------------------------------------------------------------------
STAND-ALONE)
------------

     In  March  1994,  Digital  sold  to the public 16 million Depositary shares
under  a  shelf registration, each representing a one-fourth interest in a share
of  the  Series  A Preferred Stock, par value $1.00 per share.  Dividends on the
Series  A  Preferred Stock accrue at the annual rate of 8-7/8%, or $35.5 million
per  year. The Series A Preferred Stock is not convertible into, or exchangeable
for,  shares  of  any  other  class or classes of stock.  The Series A Preferred
Stock  is  not  redeemable  prior  to April 1, 1999.  On or after April 1, 1999,
Compaq,  at  its  option, may redeem shares of the Series A Preferred Stock, for
cash  at the redemption price per share of $100 ($25 per depository share), plus
accrued  and  unpaid  dividends.  Compaq  has  guaranteed the dividend payments,
redemption  price  and  liquidation preference of the Digital Series A Preferred
Stock.  At  September 30, 1998, there were declared and unpaid dividends of $8.9
million.  The  minority interest of $422 million on the balance sheet represents
the  fair  value  of  the Series A Preferred Stock as of the date of the Digital
acquisition.

     The  summarized  unaudited  financial  information  for  Digital  and  its
consolidated  subsidiaries  on  a  stand-alone  basis  is  presented below.  The
financial  information  for the period subsequent to the acquisition is based on
the  new  basis of accounting reflecting the amounts included in the preliminary
purchase  price  allocation  resulting from Compaq's acquisition of Digital (see
Notes  2  and  3),  and  is  presented  in  accordance  with  generally accepted
accounting principles.  The new basis of accounting adjustments include (i) fair
value  adjustments  to  the historical basis of assets and liabilities acquired,
(ii)  the  fair  value  assigned  to  intangible  assets,  including  purchased
in-process  technology  and  (iii) accrued restructuring charges.  Additionally,
the  Digital stand-alone financial information includes an allocation of certain
costs  incurred  by  Compaq including (i) costs for administrative functions and
services  performed  on  behalf  of  Digital  by centralized staff groups within

                                       12
<PAGE>
Compaq,  and  (ii)  Compaq's  general  corporate  expenses.  The  costs of these
functions  and services have been allocated to Digital using methods that Compaq
management  believes  are  reasonable.  Such  allocations  are  not  necessarily
indicative  of  the  costs  that  would have been incurred if Digital had been a
separate  entity.

     Although Digital financial information is presented on a stand-alone basis,
the  companies  are  being  managed  on  a  consolidated basis.  The stand-alone
Digital  information does not necessarily reflect the results that Digital would
have realized had the acquisition not occurred and is not necessarily indicative
of  the  future  results  of  Digital.  Separate financial information and other
disclosures  concerning Digital are not deemed by management to be meaningful to
holders  of  the  Series  A  Preferred  Stock.

<TABLE>
<CAPTION>
                              NEW BASIS             OLD BASIS
                         --------------------  -------------------
                          SEPTEMBER 26, 1998    DECEMBER 27, 1997
                            (IN MILLIONS)         (IN MILLIONS)
<S>                      <C>                   <C>
Current assets           $             4,555   $             6,428
Noncurrent assets                      7,634                 2,365
Current liabilities                    4,636                 3,487
Noncurrent liabilities                 1,208                 1,910
Stockholders' equity                   6,345                 3,396

                            QUARTER ENDED         QUARTER ENDED
                          SEPTEMBER 26, 1998    SEPTEMBER 27, 1997
                            (IN MILLIONS)         (IN MILLIONS)
Revenue:
 Products                $             1,072   $             1,582
 Services                              1,422                 1,378
                         --------------------  -------------------
   Total revenue         $             2,494   $             2,960

Gross margin:
 Products                $               308   $               563
 Services                                442                   428
                         --------------------  -------------------
   Total gross margin    $               750   $               991

Net income (loss)        $              (102)  $                25
                         ====================  ===================
</TABLE>

                                       13
<PAGE>
<TABLE>
<CAPTION>
                              NEW BASIS                         OLD BASIS
                        ---------------------  -----------------------------------------
                         FOR THE PERIOD FROM    FOR THE PERIOD FROM
                            JUNE 12, 1998        DECEMBER 28, 1997        NINE MONTHS
                               THROUGH                THROUGH                ENDED
                         SEPTEMBER 26, 1998        JUNE 11, 1998      SEPTEMBER 27, 1997
                        ---------------------  ---------------------  ------------------
                            (IN MILLIONS)                     (IN MILLIONS)
<S>                     <C>                    <C>                    <C>
Revenue:
 Products               $              1,821   $              2,650   $             5,412
 Services                              1,717                  2,731                 4,325
                        ---------------------  ---------------------  -------------------
   Total revenue        $              3,538   $              5,381   $             9,737

Gross margin:
 Products               $                603   $                779   $             1,953
 Services                                536                    834                 1,343
                        ---------------------  ---------------------  -------------------
   Total gross margin   $              1,139   $              1,613   $             3,296

Net income (loss)       $          (3,175)(1)  $                (13)  $               200
                        =====================  =====================  ===================
<FN>
(1)     Net  loss  includes  $3.2  billion  for  the  write-off  of  purchased in-process
technology  resulting  from  Compaq's  acquisition  of  Digital.
</TABLE>

NOTE  12  -  SUBSEQUENT  EVENTS  -  CREDIT  FACILITIES
------------------------------------------------------

     On  October  3,  1998,  Compaq entered into a one-year $1 billion unsecured
revolving  credit  facility  to  replace  a  similar  facility  that  expired on
September  21,  1998.  In  addition,  Compaq  amended  its  five-year $3 billion
revolving  credit facility that expires in September 2002 to incorporate the new
one-year  facility.  Compaq  has  not borrowed under either of these facilities.

                                       14
<PAGE>
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 revenue, certain selected
financial data for the three and nine-month periods ended September 30, 1998 and
1997.

<TABLE>
<CAPTION>
                                       NINE MONTHS ENDED SEPTEMBER 30,  QUARTER ENDED SEPTEMBER 30,
                                       -------------------------------  ---------------------------
                                                      1998      1997     1998     1997
                                                  -----------  -------  -------  -------
<S>                                               <C>          <C>      <C>      <C>
Revenue:
 Products                                              89.7%     98.1%    82.8%    98.1%
 Services                                              10.3       1.9     17.2      1.9
Total revenue                                         100.0     100.0    100.0    100.0

Cost of sales:
 Products                                              80.0      72.6     76.5     72.5
 Services                                              68.0      73.1     68.6     73.6
Total cost of sales                                    78.7      72.6     75.1     72.6

Gross margin:
 Products                                              20.0      27.4     23.5     27.5
 Services                                              32.0      26.9     31.4     26.4
Total gross margin                                     21.3      27.4     24.9     27.4

Selling, general and administrative expenses           16.8      12.1     18.0     12.2
Research and development costs                          4.5       3.5      4.9      3.3
Purchased in-process technology(1)                     15.9       1.2        -        -
Restructuring and asset impairment charges(2)           2.0         -        -        -
Merger-related costs(3)                                   -        .3        -       .7
Other income and expense, net                          (0.2)     (0.1)     0.2     (0.1)
                                                  -----------  -------  -------  -------
                                                       39.0      17.0     23.1     16.1
                                                  -----------  -------  -------  -------
Income (loss) before provision for income taxes       (17.7)%    10.4%     1.8%    11.3%
                                                  ===========  =======  =======  =======
<FN>
(1)     Represents a $3.2 billion non-recurring, non-tax-deductible charge in the second
quarter  of  1998  in  connection  with  the  Digital  acquisition  and  a  $208 million
non-recurring,  non-tax-deductible  charge  in  the second quarter of 1997 in connection
with  the  Microcom  acquisition.
(2)     Represent  a  $393 million charge for restructuring and asset impairments in the
second  quarter  of  1998  in  connection  with  the  Digital  acquisition.
(3)     Represents  a  $44 million non-recurring, non-tax-deductible charge in the third
quarter  of  1997  related  to  costs  associated  with  the  Tandem  merger.
</TABLE>

OVERVIEW

     Compaq's  completion of recent acquisitions has resulted in an expanded and
enhanced  business model, focused on open industry-standard products, leadership
enterprise technology and solutions and a full line of global service offerings.
As  one  of  the top three global information technology companies, Compaq is an

                                       15
<PAGE>
industry  leader  committed  to  delivering  superior  customer  value  through
standards-based, partner-leveraged computing that features world class services,
support  and  market-segment  focused solutions, particularly in communications,
manufacturing and finance.  Compaq is a strategic information technology partner
to  customers of all sizes, providing product offerings that range from handheld
computers  to  powerful  failsafe  computer  servers.

     The  Company  recorded several charges during the second quarter of 1998 in
connection  with  the  June  11, 1998 Digital acquisition and closing of certain
Compaq  facilities  (see  Notes  2  and 3 to Consolidated Financial Data). These
charges,  net  of  related  taxes,  included  $3.2  billion for the write-off of
purchased  in-process  technology,  $291  million  for  restructuring  and asset
impairment  charges  related  to  Compaq employee separations and elimination of
certain  Compaq  facilities,  and  $139 million for other operating adjustments.
These  operating  adjustments  were primarily for incremental pricing actions on
certain  Digital  products  to  integrate  them  with  Compaq  products  in  the
marketplace  and  the higher cost of sales as a result of fair value adjustments
for  acquired  Digital  products  sold  since  the  acquisition  date.

     The  third quarter of 1998 was the first full quarter of operations for the
combined  companies of Compaq and Digital.  The quarter was largely transitional
as  the necessary steps were taken to begin the integration of Digital products,
services  and  the  Digital  customer  base.  Integration  efforts  include  the
consolidation  of  duplicative facilities, employee separations and relocations,
and  integration  of the internal information systems of the combined companies.

REVENUES

     Total  revenue  increased  $3  billion, or 17.7%, for the nine months ended
September  30,  1998  over  the comparable period in 1997, largely driven by the
acquisition of Digital.   Partially offsetting this revenue growth were expected
short-term reductions in revenues as a result of the continued transition to the
Optimized Distribution Model, the implementation of a product migration strategy
for  Intel-based, Digital-branded personal computers, and the realignment of the
sales and marketing organizations of the newly combined companies throughout the
world.  Product  revenue  for the nine months ended September 30, 1998 increased
$1.3  billion, or 7.7%, from the same period in 1997.  Service revenue increased
$1.7  billion  for  the  first  nine  months of 1998 over the prior year.  Total
revenue  from  North  America, including Canada, increased 4% for the nine-month
period ending September 30, 1998, compared to the same period in 1997.  European
revenue  increased  40%  while other international revenue increased 20% for the
first  nine  months  of  1998,  compared  to  the same period in the prior year.
International  revenue,  excluding  Canada, represented 52% of total revenue for
the  nine-month  period  of  1998.

     Total  revenue increased $2.3 billion, or 35.8%, for the three months ended
September  30, 1998 over the comparable period in 1997.  Product revenue for the
three months ended September 30, 1998 increased $927 million, or 14.6%, from the
same  period  in  1997,  while unit sales increased 14.3% year over year for the
third  quarter.  Service revenue increased $1.4 billion for the third quarter of
1998  over  the  third  quarter  of  1997,  primarily  due to the acquisition of
Digital.  Total  revenue from North America, including Canada, increased 15% for
the  three-month period ending September 30, 1998 compared to the same period in
1997.  European  revenue  increased  73%  while  other  international  revenue
increased  47%  in the third quarter of 1998, compared to the same period in the
prior  year.  International  revenue, excluding Canada, represented 51% of total
revenue  for  the  quarter  ended  September  30,  1998.

GROSS  MARGIN

     Gross  margin  as a percentage of revenue decreased to 21.3% from 27.4% for
the  nine-month period of 1998 and 1997, respectively, and decreased to 24.9% in
the  third  quarter  of 1998 compared to 27.4% in the comparable period of 1997.
Product  gross  margin as a percentage of product revenue declined to 20.0% from
27.4%  for  the nine-month period and decreased to 23.5% from 27.5% in the third
quarter  of  1998  compared  to  the  same  period  in  1997.  The  decrease  in
year-to-date  product gross margin resulted largely from significant pricing and
promotional  actions  taken  by  Compaq  in the North American market during the
first  and  second  quarters  of 1998 to meet the channel inventory goals of the

                                       16
<PAGE>
Company's  Optimized  Distribution  Model  and to respond to competitive pricing
conditions.  Service  gross  margin as a percentage of service revenue increased
to  32.0%  from  26.9% for the first nine months of 1998 and 1997, respectively,
and  increased  to 31.4% from 26.4% in the third quarter of 1998 compared to the
same  period  in  1997.  The  increase  in  service  gross  margin  is primarily
attributable  to  the  acquisition  of  Digital.

OPERATING  EXPENSES

     Compaq's  selling, general and administrative expense increased to 16.8% of
revenue  year-to-date compared with 12.1% for the same period in 1997.  Selling,
general  and  administrative  expense increased to 18.0% of revenue in the third
quarter  compared  with  12.2%  in  the  same  period  of 1997.  The increase in
Compaq's  selling, general and administrative expense as a percentage of revenue
is  mainly  due  to  the  acquisition  of  Digital  and  the expected short-term
reductions  in  revenue described above.  Historically, Digital has maintained a
higher cost structure than Compaq.  Compaq anticipates that for the remainder of
1998,  selling,  general  and  administrative  expense will increase in absolute
dollars  over  the  prior year primarily due to the impact of Digital's existing
cost  structure.  However,  Compaq  plans  to  achieve  a  more competitive cost
structure and reduce expenses going forward through the continued implementation
of  its  restructuring  plans,  which  include  initiatives  to  integrate  the
operations  of  the  combined companies, consolidate duplicative facilities, and
significantly  reduce  overhead.

     Research  and  development  costs increased to 4.5% and 4.9% of revenue for
the  nine  months  and  three  months  ended  September  30, 1998, respectively,
compared to 3.5% and 3.3% in the corresponding periods of 1997.  The increase in
research  and  development costs is primarily attributable to the acquisition of
Digital.  Compaq is committed to maintaining a significant level of research and
development  investment  in  support  of  both  current  operations  and  the
introduction  of  leadership  technologies  and  products  for  the  future.

PURCHASED  IN-PROCESS  TECHNOLOGY

     Upon consummation of the Digital acquisition in the second quarter of 1998,
Compaq  immediately  expensed  $3.2  billion  representing  purchased in-process
technology  that  had  not  yet  reached  technological  feasibility  and had no
alternative  future  use (see Note 2 to Consolidated Financial Data).  The value
was  determined  by  estimating  the  costs  to develop the purchased in-process
technology  into commercially viable products, estimating the resulting net cash
flows  from  such  projects,  and  discounting  the net cash flows back to their
present  values. The discount rate includes a factor that takes into account the
uncertainty  surrounding  the successful development of the purchased in-process
technology.

     The  resulting  net  cash  flows  from  such  projects  are based on Compaq
management's  estimates  of  revenues,  cost  of sales, research and development
costs,  selling,  general  and  administrative costs, and income taxes from such
projects.  These  estimates  are  based  on  the  following  assumptions:

          The estimated  revenues  project  average  compounded  annual  revenue
          growth rates of 8% to 39% during  1998-2001,  depending on the product
          areas. For instance,  UNIX/Open VMS compounded annual growth rates are
          8% and  storage  rates  are 39%.  Estimated  total  revenues  from the
          purchased  in-process  product areas peak in the year 2001 and decline
          rapidly in  2002-2005  as other new products are expected to enter the
          market.  These projections are based on Compaq management's  estimates
          of market size and growth (that are  supported by  independent  market
          data), expected trends in technology (such as new families of products
          in the  external  storage  product  area) and the nature and  expected
          timing of new product  introductions  by Digital and its  competitors.
          These  estimates  also  include  growth  related  to Compaq  utilizing
          certain Digital  technologies in conjunction  with Compaq's  products,
          Compaq's  marketing and  distributing  the resulting  products through
          Compaq's  resellers and Compaq's  enhancing  the market's  response to
          Digital's  products by  providing  incremental  financial  support and
          stability.

                                       17
<PAGE>
          The estimated cost of sales as a percentage of revenues is expected to
          be lower than  Digital's on a stand-alone  basis (66% in fiscal 1997),
          primarily due to Compaq's  expected  ability to achieve more favorable
          pricing from key component vendors and production  efficiencies due to
          economies of scale through combined  operations.  As a result of these
          savings,  the  estimated  cost of sales as a percentage of revenues is
          expected to decrease by 1% to 6% from Digital's historical percentage,
          depending on the product areas.

          The  combined  company  is  expected  to benefit  from more  favorable
          pricing  from key  component  vendors  within  three to six months and
          production efficiencies due to economies of scale within six months to
          a year  of the  closing  of the  transaction.  As a  result  of  these
          savings,  the estimated costs of sales as a percentage of revenues for
          the  UNIX/Open  VMS and  storage  markets,  the two  most  significant
          product  areas of  purchased  in-process  technology,  are expected to
          decrease up to 6% from Digital's historical percentages.

          The estimated selling,  general and administrative  costs are expected
          to more closely approximate Compaq's cost structure (approximately 12%
          of revenues in 1997),  which is lower than  Digital's  cost  structure
          (approximately  24% of  revenues  in fiscal  1997).  Cost  savings are
          expected  to  result   primarily  from  the  changes  related  to  the
          restructuring   actions  discussed  in  Note  3  to  the  Consolidated
          Financial Data, as well as savings  resulting from the distribution of
          Digital's  products through Compaq's  resellers (i.e., sales of higher
          volume products with lower direct selling costs) and  efficiencies due
          to economies of scale through combined operations (i.e.,  consolidated
          marketing and advertising  programs).  These cost savings are expected
          to be realized primarily in 1999 and thereafter. A significant portion
          of these savings is attributable to the restructuring actions, half of
          which are expected to occur in 1998 and half in 1999.

     Discounting  the net cash flows back to their present value is based on the
weighted  average  cost  of  capital  (WACC).  The WACC calculation produces the
average  required  rate  of  return of an investment in an operating enterprise,
based  on  various required rates of return from investments in various areas of
that  enterprise.  The  WACC  assumed  for  Compaq,  as  a  corporate  business
enterprise,  is  12% to 14%.  The discount rate used in discounting the net cash
flows  from purchased in-process technology ranged from 22% for UNIX/OpenVMS, NT
Systems  and  storage  to  40% for advanced development projects.  This discount
rate  is higher than the WACC due to the inherent uncertainties in the estimates
described above including the uncertainty surrounding the successful development
of  the purchased in-process technology, the useful life of such technology, the
profitability  levels  of  such  technology and the uncertainty of technological
advances  that  are  unknown  at  this  time.

     In  addition,  the  value  assigned  to purchased in-process technology for
Microcom,  Inc.,  which  Compaq  acquired  in  June  1997,  was  determined  by
identifying  research  projects  in  areas  including  modems,  remote  access
technologies  and  others,  for  which  technological  feasibility  has not been
established, estimating the costs to develop the purchased in-process technology
into commercially viable products, estimating the resulting cash flows from such
projects,  and  discounting  the  net cash flows back to the present value.  The
discount  rate  includes  a  factor  that  takes  into  account  the uncertainty
surrounding  the  successful development of the purchased in-process technology.

If  these projects are not successfully developed, the revenue and profitability
of  the  combined  company  may  be  adversely  affected  in  future  periods.
Additionally, the value of other intangible assets acquired may become impaired.
Compaq  expects  to begin to benefit from the purchased in-process technology in
late  1998  and  is  continuously  monitoring  its  development  projects.

                                       18
<PAGE>
RESTRUCTURING  AND  ASSET  IMPAIRMENT  CHARGES

     In  June  1998,  Compaq's  management  approved  restructuring plans, which
included  initiatives to integrate operations of Compaq and Digital, consolidate
duplicative  facilities,  improve  service  delivery and reduce overhead.  Total
accrued  restructuring costs of $1.7 billion were recorded in the second quarter
related  to  these initiatives, $1.4 billion of which related to Digital and was
recorded  as  a  component  of the purchase price allocation and $286 million of
which  related  to Compaq which was charged to operations.  The amounts recorded
related  to  Digital  are  based  on  management's  estimate  of  those  costs.
Management expects the Digital restructuring plans to be finalized by the end of
the  year.  Areas  where management estimates may be revised primarily relate to
Digital  employee  separation  and  relocation costs, facility closure costs and
other exit costs.  Adjustments to accrued restructuring costs related to Digital
will  be recorded as an adjustment to the preliminary purchase price allocation.

     Accrued  restructuring  costs  recorded  in June 1998 included $1.1 billion
($999  million for Digital and $132 million for Compaq) representing the cost of
involuntary  employee  separation  benefits  related  to  approximately  19,700
employees  worldwide  (approximately  14,700  Digital employees and 5,000 Compaq
employees).  Employee  separation  benefits include severance, medical and other
benefits.   Employee separations will affect the majority of business functions,
job  classes  and  geographies,  with  a majority of the reductions occurring in
North  America and Europe.  The restructuring plans also included costs totaling
$414  million  (approximately  $272  million related to Digital and $142 million
related  to  Compaq)  associated with the closure of 13.2 million square feet of
office,  distribution  and manufacturing space, principally in North America and
Europe.  Other  restructuring  costs  included  $99  million  related  to  the
relocation  of  Digital employees, with the majority of this amount attributable
to  relocations  in North America and Europe, and $100 million primarily related
to costs of terminating certain Digital contractual obligations.  Compaq expects
that most of the restructuring actions related to the plans will be completed by
June  1999.

     The  accrued  restructuring costs and amounts charged against the provision
as  of  September  30,  1998,  were  as  follows  (dollars  in  millions):

<TABLE>
<CAPTION>
                                                            BEGINNING      CASH       REMAINING
                                    COMPAQ      DIGITAL      ACCRUAL    EXPENDITURES   ACCRUAL
                                   --------  -------------  ----------  ------------  ----------
<S>                                <C>       <C>            <C>         <C>           <C>
Employee separations               $    132  $         999  $    1,131  $       (86)  $    1,045
Facility closure costs                  142            272         414          (23)         391
Relocation                                -             99          99            -           99
Other exit costs                         12             88         100           (1)          99
                                   --------  -------------  ----------  ------------  ----------
Total accrued restructuring costs  $    286  $       1,458  $    1,744  $      (110)  $    1,634
                                   ========  =============  ==========  ============  ==========
Number of employee separations
     due to restructuring actions                                             4,603
                                                                        ============
</TABLE>

     The total net headcount reduction for the quarter ended September 30, 1998,
including  attrition,  restructuring  and  selective  hiring,  was approximately
5,400.

     During  the  second  quarter  of  1998, Compaq also recorded a $107 million
charge  related  to  asset impairments.  The asset impairments resulted from the
writedown  to  fair  market  value,  less costs to sell, for assets taken out of
service  and  held for sale or disposal.  The majority of this charge relates to
the  impairment  of  $74  million  of  intangible  assets  associated  with  the
acquisition  of a company during 1995 that developed, manufactured, and supplied
fast  ethernet  hubs,  switches  and  related products.  In May 1998, management
decided  to  close  the  manufacturing  facility  and  abandon  the technologies
acquired  through  this  acquisition  and  discontinue  all  related  products.
Management  anticipates  that  additional  asset  impairments  may result in the
future  as  restructuring  plans are implemented and additional assets are taken
out  of  service  and  held  for  sale  or  disposal.  Additional  increases  in
depreciation  expense  may  occur as asset lives are adjusted as a result of the
integration  process.

                                       19
<PAGE>
Compaq's  selling,  general and administrative costs are expected to decrease in
the  future  through the continued implementation of the Company's restructuring
plans.

OTHER  ITEMS

     Compaq  had  other  income, net, of $56 and $23 million for the nine months
ended  September 30, 1998 and 1997 and other expense, net, of $18 million in the
third  quarter of 1998 and other income, net, of $4 million in the third quarter
of  1997.  This increase for the nine months was primarily due to an increase in
interest  and  dividend income related to greater cash and short-term investment
balances,  partially  offset  by  increased  interest  expense  and the minority
interest  dividend  paid to Digital preferred shareholders.  Other expense, net,
for the third quarter of 1998 relates to higher interest expense associated with
hedging  and  currency  losses  recognized  during  the  period,  as well as the
inclusion  of  the  minority  interest  dividend  paid  to  Digital  preferred
shareholders,  and  lower  interest income due to the use of cash related to the
Digital  acquisition.

LIQUIDITY  AND  CAPITAL  RESOURCES

     Compaq's  working  capital decreased to $4.4 billion at September 30, 1998,
compared  to  $6.8  billion  at  December 31, 1997, primarily as a result of the
acquisition  of  Digital, completion of a tender offer for the Digital notes and
debentures  and  actions  associated  with  accrued  restructuring  costs.

     Compaq's  cash,  cash  equivalents  and short-term investments decreased to
$4.4  billion  at  September  30,  1998, from $6.8 billion at December 31, 1997,
primarily  due  to the cash payment made to acquire Digital net of cash received
in  the  acquisition, and completion of a tender offer for the Digital notes and
debentures.  From  time to time, Compaq may sell accounts receivables when it is
economically beneficial to do so.  Accounts receivable sold in the third quarter
of  1998  were  not significant and for the quarter ended December 31, 1997 were
$1.1  billion. Inventory levels increased to $2.1 billion at September 30, 1998,
compared  to $1.6 billion at December 31, 1997, primarily due to the acquisition
of  Digital  partially  offset  by changes in production planning as a result of
Compaq's  transition  to  the Optimized Distribution Model.  For the nine months
ended  September  30,  1998, cash expenditures for restructuring activities were
$110  million.  Future  cash  expenditures  for  currently planned restructuring
activities  are  estimated  to  be  $1.6  billion.

     In  May  1998,  Compaq implemented a systematic stock repurchase program to
acquire  up  to 100 million shares of Compaq's common stock.  Compaq repurchased
approximately  6.4  million shares through September 30, 1998, for approximately
$208  million.  In June 1998, Compaq utilized approximately $4.5 billion in cash
to  complete  the acquisition of Digital ($1.4 billion net of cash acquired) and
$799  million,  including  interest,  in cash to complete a tender offer for the
Digital notes and debentures.  Cash used for the purchase of property, plant and
equipment,  net,  totaled  $470  million for the nine months ended September 30,
1998.  Compaq  estimates  that  capital  expenditures  for  land,  buildings and
equipment  during  the remainder of 1998 will be approximately $220 million.  In
June 1998, Compaq acquired a ten percent preferred equity position in a business
venture  with  Time  Warner,  Advance/Newhouse,  MediaOne  and  Microsoft  for
approximately  $213 million in cash.  The venture will provide Internet services
and  intends  to accelerate the delivery of broadband services over cable modems
to  consumers  and  small  businesses  under  the  Road  Runner  brand.

     Compaq  currently  expects to fund expenditures for capital requirements as
well  as  liquidity  needs  from  a  combination  of  available  cash  balances,
internally  generated funds and financing arrangements. Compaq from time to time
may  borrow  funds  for  actual  or  anticipated  funding needs or because it is
economically  beneficial  to  borrow  funds instead of repatriating funds in the
form  of  dividends from Compaq's foreign subsidiaries.  In addition, on October
3,  1998,  Compaq  entered into a one-year $1 billion unsecured revolving credit

                                       20
<PAGE>
facility  to  replace  a  similar  facility  that expired on September 21, 1998.
Compaq  also  has  a  $3  billion  syndicated  credit  facility  that expires in
September  2002, which was unused at September 30, 1998.  Compaq has established
a  commercial  paper program, supported by the syndicated credit facility, which
was  unused  at September 30, 1998. Compaq believes that these sources of credit
provide  sufficient  financial  flexibility to meet future funding requirements.
Compaq  continually  evaluates  the  need  to establish other sources of working
capital and will pursue those it considers appropriate based upon Compaq's needs
and  market  conditions.

     Other  planned  uses  of  cash include the efforts to develop the purchased
in-process  technology  related  to  the  Digital and Microcom acquisitions into
commercially  viable products.  This primarily consists of the completion of all
planning,  designing,  prototyping,  high-volume  manufacturing verification and
testing  activities  that  are  necessary  to  establish  that  a product can be
produced  to  meet  its design specifications, including functions, features and
technical  performance  requirements.  Bringing  the  purchased  in-process
technology  to market also includes developing firmware and diagnostic software,
device  driver  development,  and  testing  the technology for compatibility and
interoperability  with  commercially  viable  products.  As  of  the  date  of
acquisition,  the  estimated costs to be incurred to develop the Digital-related
purchased  in-process  technology  into  commercially  viable  products  total
approximately  $3.1 billion in the aggregate through the year 2005:  $60 million
in  1998, $510 million in 1999, $660 million in 2000, $630 million in 2001, $520
million  in  2002, $400 million in 2003, $210 million in 2004 and $90 million in
2005.  In  addition,  the  estimated  costs  to  develop  the Microcom purchased
in-process  technology  into  commercially viable products is approximately $500
million  from  the  date  of  acquisition  through  the  year  2001.

     In  June  1998,  the  Financial  Accounting  Standards  Board (FASB) issued
Statement  of  Financial Accounting Standards No. 133, Accounting for Derivative
Instruments  and  Hedging Activities (FAS 133).  FAS 133 is effective January 1,
2000  for  Compaq.  FAS 133 requires that all derivative instruments be recorded
on  the  balance  sheet at fair value.  Changes in the fair value of derivatives
are  recorded  each  period  in  current earnings or other comprehensive income,
depending  on  whether a derivative is designated as part of a hedge transaction
and,  if  it  is, the type of hedge transaction.  The ineffective portion of all
hedges  will  be  recognized  in  current-period  earnings.

     Compaq is in the process of determining the impact that the adoption of FAS
133  will  have  on  its  earnings  or  statement  of  financial  position.

                                       21
<PAGE>
FACTORS  THAT  MAY  AFFECT  FUTURE  RESULTS

     Compaq  participates in a highly volatile industry that is characterized by
fierce  industry-wide  competition  for  market  share.  Industry  participants
confront  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 and the application of
antitrust  laws.  In  accordance  with  the provisions of the Private Securities
Litigation Reform Act of 1995, the cautionary statements set forth below discuss
important  factors that could cause actual results to differ materially from the
projected  results  contained  in the forward-looking statements in this report.

     Market  Environment.  Compaq expects the personal computer market to expand
in  1998  in  line  with  third  party research organizations' forecasts of unit
growth  in  the range of 15% to 16%, although the growth rate for this market is
expected  to  decrease  in  1999  compared  to  1998.  The  Company  expects the
enterprise  market  to  expand  with  the  development  of internet and intranet
enterprise  applications  and the corporate MIS migration from legacy systems to
client/server  systems.  This  expansion  represents an opportunity for Compaq's
services  business  to  help  enable customers to implement and manage these new
environments.  With  its  acquisition  of  Tandem  Computers Incorporated in the
third  quarter  of  1997 and the acquisition of Digital Equipment Corporation in
the  second  quarter  of 1998, the Company confronts a challenge in building the
high-end  UNIX  solutions  market  while  continuing  to  advance  the sphere of
NT-based  solutions  to  achieve  the  lowest  cost of ownership and the highest
computing  value  for its customers.  Although Compaq has programs, products and
services  focused  on meeting market demand, gaining market share profitably and
maintaining gross margins, Compaq's ability to achieve these goals is subject to
the  risks  set  forth  in  this  discussion.

     Competitive  Environment.  Competition  remains  fierce  in the information
technology  industry  with a large number of competitors vying for market share.
Competition  creates  an  aggressive pricing environment, which continues to put
pressure  on  gross  margins.  A  number  of  personal  computer  companies sell
directly to end users and, particularly in the U.S., direct sales have increased
as a percentage of the total personal computer market.  Compaq has established a
variety  of  programs  designed to increase its manufacturing, distribution, and
business process efficiencies to enable it to compete more effectively in its PC
business.  Compaq  sells  directly to end users in its high-end business and its
service  business.  The  success  of  its  programs  to  increase  its  business
efficiencies  depends  upon  Compaq's ability to continue its successful working
relationship  with its resellers, to maintain and increase its service business,
to both predict and react quickly to market responses by its competitors, and to
continue  the  implementation  of  its Optimized Distribution Model, the goal of
which  is  to  implement  more  efficient  component  supply, manufacturing, and
distribution  strategies  to  increase  overall  efficiencies.

     Risks  of Newly Acquired Businesses. As a result of Compaq's acquisition of
Digital,  it  will  expand  its service offerings and enterprise solutions. This
expansion,  however,  includes  a  number  of  risks  associated  with Digital's
business.  Compaq  believes  that  the  Digital  acquisition  will  enhance  its
operating  results,  but  as  with  any  significant  acquisition  or merger, it
confronts  challenges  in  retaining  key  employees,  maintaining  key industry
alliances,  synchronizing  product  roadmaps  and  business  processes,  and
integrating  logistics,  marketing,  product  development,  services  and
manufacturing  operations  to achieve greater efficiencies. In June 1998, Compaq
announced  that  its  earnings  in the second quarter would be at break even and
that the third quarter would be transitional, focused both on the integration of
Digital  businesses  and  the  achievement of synergies. In October 1998, Compaq
stated  that  the  integration  of  Digital  would  continue  through the fourth
quarter,  with  Compaq taking necessary actions to achieve additional synergies.
While  Compaq  intends to increase its service revenue through this acquisition,
there are risks associated with the service business, which include jeopardizing
Compaq's  long-term  relationships  with third party resellers while it provides
services  directly to end-user customers, as well as reducing service revenue in

                                       22
<PAGE>
the  short  term due to the cancellation of Digital's existing service contracts
by  Compaq's  competitors.  Compaq has also made certain estimates in connection
with  the  value  of purchased in-process technology.  If these projects are not
successfully  developed,  its  future revenue and profitability may be adversely
affected and the value of other intangibles could be reduced.  This risk is more
fully  discussed  under  "Purchased  In-Process  Technology."  Compaq  plans  to
continue  to  use  strategic acquisitions and mergers to assist in the growth of
its  business.

     Third  Party  Relationships.  Compaq  works with third parties in strategic
alliances  to  facilitate  product  offerings,  product  development,  and
compatibility,  in  various  manufacturing, configuring and shipping capacities,
and  as  suppliers of components and services in non-core competencies. Although
it  tries  to  achieve  strong  working relationships with parties who share its
industry  goals  and  have adequate resources to fulfill their responsibilities,
these relationships lead to a number of risks. First, these companies may suffer
financial or operational difficulties that affect their performance, which could
lead to delays in product announcements and gaps in component supplies.  Second,
major companies from which the Company purchases components or services (such as
Intel,  Microsoft, Cisco and IBM) may be competitors in other areas, which could
affect  pricing,  new  product  development  or  future  performance.  Third,
difficulties  in  coordinating  activities  may  lead  to  gaps  in delivery and
performance  of  products.  Finally,  companies  from  which  Compaq  purchases
components  may be subject to legal challenges that impede their ability to ship
their  products  in  a  timely  manner.  A  number of regulatory authorities are
currently  investigating allegations of violations of antitrust laws in the high
technology  arena and the U.S. government has filed suit against Microsoft.  Any
delays in the development or shipments of new products resulting from such legal
proceedings  could delay Compaq's products as well as negatively impact customer
demand  stemming  from  new  product  generations.

     Inventory.  In  the  event  of  a  drop  in  worldwide  demand for computer
products,  lower-than-anticipated  demand  for one or more of Compaq's products,
difficulties  in  managing  product transitions, or component pricing movements,
there  could  be  an  adverse  impact  on  inventory  levels,  cash, and related
profitability.

     Rapid  Technology  Cycles.  Compaq  believes  the  computer  industry  will
continue  to drive rapid technology cycles.  In planning product transitions, it
evaluates  the  speed at which customers are likely to switch to newer products.
The  contrast  between  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. Because of the lead times associated with
its  volume  production,  should  Compaq  be unable to gauge the rate of product
transitions  accurately,  there  could be an adverse impact on inventory levels,
cash,  and  profitability.  In  addition,  as a result of the Tandem and Digital
acquisitions,  Compaq  is  engaged  in  direct  sales  of  computer systems with
software  developed  to meet customers' specific needs.  The long-term nature of
such  contracts  exposes Compaq to risks associated with changing customer needs
and  expectations.

     Product  Transitions.  In  each product cycle, Compaq confronts the risk of
delays  in production that could impact sales of newer products while it manages
the inventory of older products and facilitates the sale of older inventory held
by  resellers.  To  ease product transitions, Compaq carries out pricing actions
and marketing programs to increase sales by resellers. It provides currently for
estimated  product  returns  and  price protection that may occur under reseller
programs  and  under  floor  planning  arrangements  with  third-party  finance
companies.  Should  Compaq  be unable to sell the inventory of older products at
anticipated prices, should it not anticipate pricing actions that are necessary,
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.

     Systems  Implementation.  Compaq  continues to focus on making business and
information  management  processes  more efficient in order to increase customer
satisfaction,  improve  productivity and lower costs. In the event of a delay in
implementing improvements, there could be an adverse impact on inventory levels,

                                       23
<PAGE>
cash  and  related  profitability.  In  connection with these efforts, Compaq is
moving  many  of its systems from a legacy environment of proprietary systems to
client-server  architectures  as well as integrating systems from newly acquired
businesses.  Integrating  the  systems  at  Digital  and  Tandem  has  further
complicated  this  process.  Should the transition to new systems not occur in a
smooth  and  orderly  manner, Compaq could experience disruptions in operations,
which  could  have  an  adverse  financial  impact.

     Technology  Standards  and  Key  Licenses.  Participants  in  the  computer
industry  generally  rely  on  the  creation  and  implementation  of technology
standards to win the broadest market acceptance for their products.  Compaq must
successfully  manage  and  participate  in  the  development  of standards while
continuing  to  differentiate  its  products  and services 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,  Compaq 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
costs.  Compaq  has  entered  into  license  agreements  with  key  industry
participants.  There can be no assurance that it will be able to negotiate terms
that  give  it  a competitive market advantage under the license agreements that
are  necessary  to  operate  its  business  in  the  future.

     Production  Forecasts.  In  managing  production,  Compaq  must  forecast
customer  demand for its products. Should the Company underestimate the supplies
needed  to  meet  demand,  it could be unable to meet customer demand. Should it
overestimate the supplies needed to meet customer demand, cash and profitability
could  be  adversely affected. Many of the components used in Compaq's products,
particularly  microprocessors  and  memory, experience steep price declines over
their  product  lives.  If  the  Company  is  unable  to  manage  purchases  and
utilization  of  such  components  efficiently  to maintain low inventory levels
immediately  prior to major price declines, it could be unable to take immediate
advantage  of such declines to lower product costs, which could adversely affect
sales  and  gross  margins.  Furthermore,  should prices for components increase
unexpectedly,  Compaq's  gross  margin  could  be  adversely  affected.

     Credit Risks. Compaq's primary means of distribution is through third-party
resellers.  It  continually  monitors  and  manages  the  credit  it  extends to
resellers  and  attempts  to  limit  credit  risks  by  broadening  distribution
channels,  utilizing  certain  risk transfer arrangements and obtaining security
interests.  Compaq's  business could be adversely affected in the event that the
financial condition of third-party computer resellers erodes. Upon the financial
failure  of  a  major  reseller,  the  Company  could  experience disruptions in
distribution  as  well  as  a  loss associated with the unsecured portion of any
outstanding  accounts  receivable.  Geographic  expansion,  particularly
manufacturing  operations in developing countries, such as Brazil and China, and
the  expansion  of  sales into economically volatile areas such as Asia Pacific,
Latin America and other emerging markets, subject Compaq to a number of economic
and other risks, such as financial instability among resellers in these regions.
Compaq  generally  has experienced longer accounts receivable cycles in emerging
markets, in particular Asia Pacific and Latin America, when compared to U.S. and
European  markets.  In  addition,  geographic  expansion  subjects  Compaq  to
political  and financial instability of the countries into which Compaq expands,
including  currency  devaluation  and  interest  rate fluctuations.  The Company
continues  to  evaluate business operations in these regions and attempt to take
measures  to  limit  risks  in  these  areas.

     Year  2000  Compliance.  The  following disclosure is a Year 2000 readiness
disclosure  statement  pursuant  to  the Year 2000 Readiness and Disclosure Act.

     Compaq's  Year  2000  program  is  designed  to minimize the possibility of
serious  Year  2000  interruptions.  Possible  Year  2000  worst  case scenarios
include  the  interruption of significant parts of Compaq's business as a result
of  critical  information  systems  failure  or  the  failure  of  suppliers,
distributors  or  customers.  Any  such interruption may have a material adverse
impact  on  future results. Since their possibility cannot be eliminated, Compaq

                                       24
<PAGE>
is  incorporating Year 2000 concerns into its contingency plans for dealing with
catastrophic  events.  In  addition,  Compaq  is  monitoring the need to develop
contingency  plans  to remediate information systems scheduled to be replaced by
systems  renewal efforts in case delays in the installation schedule for the new
systems  make  remediation  of  the  older  systems  necessary.

     In  1997,  Compaq established a task force to address its personal computer
product and customer concerns, and a separate task force to address its internal
information systems, including technology infrastructure and embedded technology
systems,  and the compliance of its suppliers and distributors.  In 1998, Compaq
integrated  the Tandem and Digital task forces with those of its own so that the
two task forces now address the product and information systems and supplier and
distributor  concerns  for  all  three  entities.

     With  respect  to  product readiness, the compliance definitions of Compaq,
Tandem  and  Digital  remain  in  effect  for  most  of the respective follow-on
products  of  each  company.  See  "Item 1.  Business - Year 2000 Transition" in
Compaq's  Form 10-K for the year ended 1997 for the Compaq and Tandem compliance
definitions.  Compaq  defines  Year  2000  compliance  for Digital's products as
"products  capable  of  accurately  processing, providing, and/or receiving date
data  from,  into  and between the twentieth and the twenty-first centuries, and
the  years  1999  and  2000,  including  leap  year  calculations,  when used in
accordance  with  the associated Digital product documentation and provided that
all  hardware,  firmware  and  software  used  in  combination with such Digital
products properly exchange accurate date data with the Digital products."  Older
systems  sold  by  Digital  may  not  be capable of meeting this definition. The
readiness  status  of  Compaq,  Tandem  and Digital products is available on the
Compaq  Year  2000  Web site at www.compaq.com/year2000.  In addition to selling
                                -----------------------
tested  products,  Compaq  also  offers a range of Year 2000 readiness services.
Because there is no uniform definition of Year 2000 "compliance" and because all
customer  situations  cannot  be anticipated, particularly those involving other
vendors'  products,  Compaq  may  see  a  decrease  in  demand or an increase in
warranty and other claims as a result of the Year 2000 transition.  Such events,
should  they  occur,  could  have  a  material adverse impact on future results.

     To  date,  most  internal  information  systems  and  other  infrastructure
areas including communication systems,  building  security systems and  embedded
technologies  in  areas  such  as  manufacturing processes have been identified,
assessed,  and  categorized  for  Year 2000  readiness as  Priority 1, 2 and  3,
with  1  being critical, 2 being intermediate and  3 being non-critical.  During
the  third  quarter,  the  milestones  for  achieving  Year 2000  compliance for
these  systems  were  adjusted  to  allow  for  the  complexities of the Digital
integration.  Priority  1  and  Priority  2 items will be Year 2000 compliant by
June  30,  1999,  and  Priority  3 items are to be ready by December 31, 1999 or
replaced  or  left  undetermined.  To  date, Compaq has completed remediation on
approximately 20% of the Priority 1 items, and expects to be 90% complete by the
end  of  March  1999.  Specific contingency plans are being made with respect to
any  Priority  1 listings, which cannot be tested or determined to be compliant.
Also,  key  suppliers and distributors have been identified and Compaq is in the
process  of  communicating  with  them about their Year 2000 readiness plans and
progress.  In  each  of these areas, various testing and readiness determination
methodologies  are  being  used,  based  on what is appropriate for each type of
system, supplier or distributor.  Specific contingency plans are being made with
respect  to  any  Priority  1 listings that cannot be tested or determined to be
compliant.

     Coincident  with Year 2000 readiness efforts, Compaq is rapidly integrating
the  Digital  operations  worldwide.  This  includes rationalization of internal
systems, facilities and other infrastructure.  Compaq is also carrying out major
planned  enterprise-wide  internal  system  renewal efforts. These planned major
enterprise-wide  system  renewals  have  been  incorporated  into  the Year 2000
readiness  effort.  Installations  at  several locations have been completed and
are  operational.  Future  installations  are scheduled through the end of 1999.
Based  on Compaq's ongoing evaluation of internal information and other systems,
the  integration  of  Digital operations, and system renewal roll-out schedules,
Compaq  does  not anticipate significant business interruption.  However, should

                                       25
<PAGE>
business  interruption occur, there could be a material adverse impact on future
results.  With respect to suppliers and distributors, because Compaq's readiness
depends  upon  their  cooperation  in  identifying,  disclosing  and remediating
problems,  failures  on  the  part  of  suppliers  and  distributors  remain  a
possibility  and  could  have  a  material  adverse  impact  on  future results.

     The  costs  of  the  readiness  program for products are primarily costs of
existing  internal  resources  largely  absorbed  within  existing  engineering
spending  levels.  These costs were incurred primarily in 1997 and earlier years
and  were  not  broken  out  from  other  product  engineering costs.  No future
material  product  readiness  costs are anticipated.  The costs of the readiness
program  for  internal  information  and  other  systems  and  suppliers  and
distributors  are  a  combination  of  incremental  external spending and use of
existing  internal  resources  and  expertise.  Over  the  life  of the internal
readiness  effort,  these  costs  are  estimated  to  be  $120 million, of which
approximately  one-third  has  been incurred to date.  The costs of implementing
enterprise-wide  system  renewal  efforts  are  not  included  in this estimate.
Milestones  and  implementation  dates  and  the  costs  of  Compaq's  Year 2000
readiness  program  are  subject  to  change based on new circumstances that may
arise or new information becoming available, which change underlying assumptions
or  requirements.

     Euro Conversion.   Effective January 1, 1999, 11 of the 15 member countries
of  the  European  Union  have  agreed  to  adopt the euro as their common legal
currency.  On  that date, the participating countries are scheduled to establish
fixed  euro conversion rates between their existing sovereign currencies and the
euro.    The  euro  will  then  trade on currency exchanges and be available for
non-cash  transactions.  The  participating  countries will issue sovereign debt
exclusively in euros, and will redenominate outstanding sovereign debt.  At that
time,  the  authority to direct monetary policy for the participating countries,
including  money  supply  and  official  interest  rates  for  the euro, will be
exercised  by  the  new  European  Central  Bank.

     In 1997, Compaq established a euro task force to address its PC product and
customer  concerns,  and  a  separate  task  force  to address Compaq's internal
information  systems.  Compaq hopes to achieve euro product readiness and enable
internal  information  systems  to  conduct  electronic transactions in the euro
within  or  before  the  first  quarter  of  1999.  The  schedule and details of
subsequent phases of internal systems readiness is under review, but will comply
with implementation schedules set by the European Commission.  We do not believe
the  costs  of  the overall effort will have a material adverse impact on future
results.  However,  since  all customer situations cannot be anticipated, Compaq
may  see  a  decrease in demand or an increase in warranty and other claims as a
result of the euro implementation.  Such events, should they occur, could have a
material adverse impact on future results.  Based on Compaq's ongoing evaluation
of  internal  information  systems, integration of Digital operations and system
renewal  roll-out  schedules,  Compaq  does  not anticipate significant business
interruption.  However,  should a significant business interruption occur, there
could  be  a  material  adverse  impact  on  future  results.  With  respect  to
compliance  by  suppliers  and  distributors,  failures remain a possibility and
could  have  a  material  adverse  impact  on  future  results.

     Milestones  and  implementation  dates  and  the  costs  of  Compaq's  euro
readiness  program  are  subject  to  change based on new circumstances that may
arise  or  new  information  becoming  available,  which  changes  underlying
assumptions  or  requirements.

     Tax Rate.  Compaq currently has a 26% effective tax rate, before the effect
of  non-deductible  purchased in-process technology and merger-related costs and
expects this rate will continue at approximately the same level throughout 1998.
Compaq  benefits  from  a  tax holiday in Singapore that expires in 2001, with a
potential  extension  to August 2004 if certain cumulative investment levels and
other  conditions  are  met.  Compaq's  tax  rate  is heavily dependent upon the
proportion  of  earnings  that  is  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 Compaq's total
earnings  were  to decline significantly from current levels, or should Compaq's

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<PAGE>
ability to reinvest these earnings be reduced, Compaq's effective tax rate would
increase.  In  addition,  should  Compaq's  intercompany  transfer  pricing with
respect  to  its  Singaporean  manufacturing  subsidiary  require  significant
adjustment  due  to audits or regulatory changes, Compaq's overall effective tax
rate  could  increase.

     Currency  Fluctuations.  Compaq's  risks  associated  with  currency
fluctuations  are  discussed  in  Item  3  below.

     Because  of  the  foregoing  factors,  as well as other variables affecting
Compaq'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.

ITEM  3.  MARKET  RISKS

     Compaq  is  exposed  to  market  risks,  which  include changes in U.S. and
international  interest  rates  as well as changes in currency exchange rates as
measured  against  the  U.S.  dollar and each other. It attempts to reduce these
risks  by  utilizing  financial  instruments, including derivative transactions,
pursuant  to  company  policies.

     Compaq uses market valuations and value-at-risk valuation methods to assess
market risk of its financial instruments and derivative portfolios. It uses J.P.
Morgan's RiskMetrics (TM) to estimate the  value-at-risk  based  on estimates of
volatility   and  correlation  of  market  factors  drawn   from  J.P.  Morgan's
RiskMetrics (TM) data  sets  as  of  June  30, 1998.  Its measured value-at-risk
from holding derivative and other financial instruments,  using a 95% confidence
level and assuming normal market conditions at June  30,  1998,  was immaterial.

     The  value  of the U.S. dollar affects Compaq's financial results.  Changes
in  exchange  rates  may  positively  or  negatively  affect  Compaq's sales (as
expressed  in  U.S.  dollars),  gross  margins, operating expenses, and retained
earnings.  Compaq  engages  in  hedging  programs  aimed at limiting in part the
impact  of  currency  fluctuations.  Using primarily forward exchange contracts,
Compaq  hedges  those  assets and liabilities that, when remeasured according to
generally  accepted  accounting  principles,  impact  the income statement.  For
certain  markets, particularly Latin America, Compaq has determined that ongoing
hedging of 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,  Compaq  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 Compaq's
international  marketing  subsidiaries,  with the exception of Latin America and
certain other subsidiaries that reside in countries in which such activity would
not  be  cost  effective  or  local  regulations preclude this type of activity.
These  hedging  activities  provide  only  limited  protection  against currency
exchange  risks. Factors that could impact the effectiveness of Compaq's hedging
programs  include  accuracy  of  sales  forecasts,  volatility  of  the currency
markets,  and  availability  of hedging instruments. All currency contracts that
are  entered  into  by Compaq are components of hedging programs and are entered
into  for  the  sole  purpose  of  hedging  an  existing or anticipated currency
exposure,  not  for  speculation.  Although  Compaq  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 Compaq sells
products  or a weakening exchange rate against currencies in which Compaq incurs
costs,  Compaq's  sales  or  costs  are  adversely  affected.

                                       27
<PAGE>
                           PART II.  OTHER INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS

     See  Note  10  to  Consolidated  Financial  Data.

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

<TABLE>
<CAPTION>
<S>               <C>
(a)  Exhibit No.  Description
                  $1,000,000,000  Credit  Agreement  dated  as of October 2, 1998, among
     10.21        Compaq  Computer  Corporation,  the  banks signatory thereto and Bank of America
                  National  Trust  and  Savings  Association,  as  Administrative  Agent.

     10.22        Amendment No. 1 to $3,000,000,000 Credit Agreement dated as of October
                  2, 1998, among Compaq Computer Corporation, the banks signatory thereto and Bank
                  of  America  National  Trust  and  Savings  Association, as Administrative Agent.

     27           EDGAR  financial  data  schedule.


(b)  (i)          Report on Form 8-K dated July 15, 1998, containing Compaq's news
                  release dated July 15, 1998, with respect to its earnings release for the second
                  quarter  of  1998.

     (ii)         Report on Form 8-K/A dated August 14, 1998, amending Compaq's Form 8-K,
                  dated  June  11,  1998,  to  include  pro forma combined financial statements to
                  reflect  the  acquisition  of  Digital  Equipment  Corporation.

     (iii)        Report  on  Form  8-K/A  dated August 14, 1998, amending Compaq's Form
                  8-K,  dated  June 11, 1998, to amend the pro forma combined financial statements
                  previously  filed  that  reflected  the  acquisition  of  Digital  Equipment
                  Corporation.

     (iv)         Report  on  Form  8-K  dated October 14, 1998, containing Compaq's news
                  release  dated  October  14,  1998, with respect to its earnings release for the
                  third  quarter  of  1998.

All  other  items  specified  by  Part  II  of  this report are inapplicable and accordingly  have  been  omitted.
</TABLE>

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<PAGE>
                                   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  11,  1998                 COMPAQ  COMPUTER  CORPORATION



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




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