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 JUNE 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 of            (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  June  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
                                                                JUNE 30,   DECEMBER 31,
                                                                  1998         1997
                                                               ----------  -------------
(IN MILLIONS)
<S>                                                            <C>         <C>
Current assets:
   Cash and cash equivalents. . . . . . . . . . . . . . . . .  $   4,596   $       6,418
   Short-term investments . . . . . . . . . . . . . . . . . .          -             344
   Accounts receivable, net . . . . . . . . . . . . . . . . .      5,431           2,891
   Inventories. . . . . . . . . . . . . . . . . . . . . . . .      2,202           1,570
   Deferred income taxes. . . . . . . . . . . . . . . . . . .      1,981             595
   Other current assets . . . . . . . . . . . . . . . . . . .        578             199
                                                               ----------  -------------
        Total current assets. . . . . . . . . . . . . . . . .     14,788          12,017
Property, plant and equipment, less accumulated depreciation.      2,855           1,985
Deferred income taxes . . . . . . . . . . . . . . . . . . . .        862               -
Intangible and other assets . . . . . . . . . . . . . . . . .      3,243             629
                                                               ----------  -------------
                                                               $  21,748   $      14,631
                                                               ==========  =============


              LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable . . . . . . . . . . . . . . . . . . . . .  $   3,614   $       2,837
   Income taxes payable . . . . . . . . . . . . . . . . . . .        201             195
   Accrued restructuring costs. . . . . . . . . . . . . . . .      1,734               -
   Other current liabilities. . . . . . . . . . . . . . . . .      5,017           2,170
                                                               ----------  -------------
        Total current liabilities . . . . . . . . . . . . . .     10,566           5,202
                                                               ----------  -------------
Postretirement and other postemployment benefits. . . . . . .        398               -
                                                               ----------  -------------
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:
       1,671 million shares at June 30, 1998 and
       1,519 million shares at December 31, 1997) . . . . . .      6,724           2,096
    Retained earnings . . . . . . . . . . . . . . . . . . . .      3,664           7,333
    Treasury stock (at cost). . . . . . . . . . . . . . . . .        (26)              -
                                                               ----------  -------------
       Total stockholders' equity . . . . . . . . . . . . . .     10,362           9,429
                                                               ----------  -------------
                                                               $  21,748   $      14,631
                                                               ==========  =============
</TABLE>

             See accompanying notes to consolidated financial data.


                                        1
<PAGE>
<TABLE>
<CAPTION>
                              COMPAQ COMPUTER CORPORATION
                            CONSOLIDATED STATEMENT OF INCOME
                                      (UNAUDITED)


                                                     SIX MONTHS            QUARTER
                                                    ENDED JUNE 30,      ENDED JUNE 30,
                                                  ------------------  -----------------
                                                    1998      1997      1998     1997
                                                  --------  --------  --------  -------
                                                 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S>                                               <C>       <C>       <C>       <C>
Revenue:
    Product sales. . . . . . . . . . . . . . . .  $10,947   $10,573   $ 5,372   $5,405 
    Service revenue. . . . . . . . . . . . . . .      572       214       460      110 
                                                  --------  --------  --------  -------
                                                   11,519    10,787     5,832    5,515 
                                                  --------  --------  --------  -------
Cost of sales:
    Cost of product sales. . . . . . . . . . . .    9,007     7,677     4,406    3,897 
    Cost of service revenue. . . . . . . . . . .      379       156       316       81 
                                                  --------  --------  --------  -------
                                                    9,386     7,833     4,722    3,978 
                                                  --------  --------  --------  -------


Selling, general, and administrative expense . .    1,836     1,309     1,051      670 
Research and development costs . . . . . . . . .      494       387       249      198 
Purchased in-process technology. . . . . . . . .    3,234       208     3,234      208 
Restructuring and asset impairment charges . . .      393         -       393        - 
Other income and expense, net. . . . . . . . . .      (74)      (19)      (44)      (4)
                                                  --------  --------  --------  -------
                                                    5,883     1,885     4,883    1,072 
                                                  --------  --------  --------  -------
Income (loss) before provision for income taxes.   (3,750)    1,069    (3,773)     465 
Provision (benefit) for income taxes . . . . . .     (134)      398      (141)     208 
                                                  --------  --------  --------  -------
Net income (loss). . . . . . . . . . . . . . . .  $(3,616)  $   671   $(3,632)  $  257 
                                                  ========  ========  ========  =======


Earnings (loss) per common share:
          Basic. . . . . . . . . . . . . . . . .  $ (2.35)  $   .45   $ (2.33)  $  .17 
                                                  ========  ========  ========  =======
          Diluted. . . . . . . . . . . . . . . .  $ (2.35)  $   .43   $ (2.33)  $  .17 
                                                  ========  ========  ========  =======


Shares used in computing earnings (loss) per
    common share:
          Basic. . . . . . . . . . . . . . . . .    1,539     1,497     1,556    1,500 
                                                  ========  ========  ========  =======
          Diluted. . . . . . . . . . . . . . . .    1,539     1,547     1,556    1,552 
                                                  ========  ========  ========  =======
</TABLE>

             See accompanying notes to consolidated financial data.


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

                                                                  SIX MONTHS
                                                                 ENDED JUNE 30,
                                                               -----------------
                                                                 1998     1997
                                                               --------  -------
                                                                 (IN MILLIONS)
<S>                                                            <C>       <C>
Cash flows from operating activities:
  Net income (loss) . . . . . . . . . . . . . . . . . . . . .  $(3,616)  $  671 
  Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
       Depreciation and amortization. . . . . . . . . . . . .      272      256 
       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 . . . . . . . . . . . . . . . .     (261)     893 
          Inventories . . . . . . . . . . . . . . . . . . . .      644     (409)
          Other current assets. . . . . . . . . . . . . . . .       17      (23)
          Accounts payable. . . . . . . . . . . . . . . . . .       (9)     469 
          Income taxes payable. . . . . . . . . . . . . . . .     (128)    (124)
          Accrued restructuring costs . . . . . . . . . . . .      (10)       - 
          Other current liabilities . . . . . . . . . . . . .      (26)      70 
                                                               --------  -------
  Net cash provided by operating activities . . . . . . . . .      510    2,011 
                                                               --------  -------
Cash flows from investing activities:
  Purchases of property, plant and equipment, net . . . . . .     (257)    (298)
  Purchases of short-term investments . . . . . . . . . . . .        -     (968)
  Proceeds from short-term investments. . . . . . . . . . . .      344    1,143 
  Acquisition of businesses, net of cash acquired . . . . . .   (1,413)    (268)
  Other, net. . . . . . . . . . . . . . . . . . . . . . . . .     (314)      35 
                                                               --------  -------
  Net cash used in investing activities . . . . . . . . . . .   (1,640)    (356)
                                                               --------  -------
Cash flows from financing activities:
  Payments to retire debt . . . . . . . . . . . . . . . . . .     (788)    (293)
  Purchase of treasury shares . . . . . . . . . . . . . . . .      (26)       - 
  Issuance of common stock pursuant to stock option plans . .       94       80 
  Dividends paid. . . . . . . . . . . . . . . . . . . . . . .      (23)       - 
  Other, net. . . . . . . . . . . . . . . . . . . . . . . . .        -      (37)
                                                               --------  -------
  Net cash used in financing activities . . . . . . . . . . .     (743)    (250)
                                                               --------  -------
Effect of exchange rate changes on cash and cash equivalents.       51       29 
                                                               --------  -------
  Net increase (decrease) in cash and cash equivalents. . . .   (1,822)   1,434 
Cash and cash equivalents at beginning of period. . . . . . .    6,418    3,008 
                                                               --------  -------
Cash and cash equivalents at end of period. . . . . . . . . .  $ 4,596   $4,442 
                                                               ========  =======
</TABLE>

             See accompanying notes to consolidated financial data.


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

                                     SIX MONTHS
                                   ENDED JUNE 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 acquisition.  $ 1,413   $ 268 
                                  ========  ======
</TABLE>

             See accompanying notes to consolidated financial data.


                                        4
<PAGE>
                           COMPAQ COMPUTER CORPORATION
                      NOTES TO CONSOLIDATED FINANCIAL DATA

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

     The  accompanying unaudited consolidated financial data as of June 30, 1998
and  December  31,  1997  and for the three and six-month periods ended June 30,
1998  and  1997  have  been prepared on substantially the same basis as Compaq's
annual  consolidated  financial  statements. Compaq completed its 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 six-month periods ended
June  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.
In  the opinion of Compaq, 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.

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

     On  June  11, 1998, Compaq consummated its acquisition of Digital.  Digital
is  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.


                                        5
<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  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.

      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  are  presented for illustrative
purposes  only  and  are  not  necessarily  indicative of the combined financial
position or results of operations of future periods or the results that actually
would  have  resulted  had Compaq and Digital been a combined company during the
specified  periods.  The  pro  forma results include the effects of the purchase
price  allocation  on  depreciation  of  property,  plant  and  equipment  and
amortization  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.


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

<TABLE>
<CAPTION>
                                                        SIX MONTHS
                                                       ENDED JUNE 30,
                                                        1998     1997
                                                      --------  -------
                                                     PRO FORMA UNAUDITED
                                          (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S>                                                   <C>       <C>
Revenue:
     Product sales . . . . . . . . . . . . . . . . .  $13,596   $14,403
     Service revenue . . . . . . . . . . . . . . . .    3,304     3,161
                                                      --------  -------
        Total revenue. . . . . . . . . . . . . . . .  $16,900   $17,564

Net income (loss). . . . . . . . . . . . . . . . . .  $   530   $   623
                                                      ========  =======


Earnings (loss) per common share:
     Basic . . . . . . . . . . . . . . . . . . . . .  $  (.32)  $   .38
                                                      ========  =======
     Diluted . . . . . . . . . . . . . . . . . . . .  $  (.32)  $   .37
                                                      ========  =======


Shares used in computing earnings per common share:
     Basic . . . . . . . . . . . . . . . . . . . . .    1,652     1,638
                                                      ========  =======
     Diluted . . . . . . . . . . . . . . . . . . . .    1,652     1,692
                                                      ========  =======
</TABLE>

The  net loss for the six months ended June 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
include  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 have been recorded
in  the  second  quarter  related  to  these  initiatives, $1.4 billion of which
relates  to  Digital  and  was  recorded  as  a  component of the purchase price
allocation  and $286 million relates to Compaq, which was charged to operations.
Management  is  in  the process of finalizing its restructuring plans related to
Digital,  and  accordingly, the amounts recorded related to Digital are based on
management's  current  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
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  charges  include  $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 in North America and Europe.  The
restructuring  plans  also  include  costs  totaling  $414 million ($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
include  $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  within  the  next  year.


                                        7
<PAGE>
NOTE  3  -  RESTRUCTURING  AND  ASSET  IMPAIRMENT  CHARGES  (CONTINUED)
----------------------------------------------------------------------

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

<TABLE>
<CAPTION>
---------------------------------  -------------  --------  -----------  -----
                                                             CURRENT
                                                              YEAR
                                      COMPAQ      DIGITAL    SPENDING   TOTAL
---------------------------------  -------------  --------  -----------  -----
<S>                                <C>            <C>       <C>         <C>
Employee separations. . . . . . .  $         132  $    999  $      (4)  $1,127
Facility closure costs. . . . . .            142       272         (6)     408
Relocation. . . . . . . . . . . .              -        99          -       99
Other exit costs. . . . . . . . .             12        88          -      100
---------------------------------  -------------  --------  -----------  -----
Total accrued restructuring costs  $         286  $  1,458  $     (10)  $1,734
---------------------------------  -------------  --------  -----------  -----
Number of employee separations
     due to restructuring actions                                  46
---------------------------------  -------------  --------  -----------  -----
</TABLE>

     During  the  quarter, 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.

NOTE  4  -  CERTAIN  BALANCE  SHEET  COMPONENTS
-----------------------------------------------

<TABLE>
<CAPTION>
                                         JUNE 30,   DECEMBER 31,
                                           1998         1997
                                         ---------  -------------
                                             (IN MILLIONS)
<S>                                      <C>        <C>
INVENTORIES:
  Raw materials and work-in-process . .  $     943  $         767
  Finished goods. . . . . . . . . . . .      1,259            803
                                         ---------  -------------
                                         $   2,202  $       1,570
                                         =========  =============


PROPERTY, PLANT & EQUIPMENT:
  Land. . . . . . . . . . . . . . . . .  $     423  $         185
  Buildings and leasehold improvements.      2,483          1,076
  Machinery and equipment . . . . . . .      3,834          2,392
  Construction-in-process and other . .        452            373
                                         ---------  -------------
                                             7,192          4,026
  Less accumulated depreciation . . . .      4,337          2,041
                                         ---------  -------------
                                         $   2,855  $       1,985
                                         =========  =============
</TABLE>


                                        8
<PAGE>
NOTE  4  -  CERTAIN  BALANCE  SHEET  COMPONENTS  (CONTINUED)
------------------------------------------------------------

<TABLE>
<CAPTION>
                                        JUNE 30,   DECEMBER 31,
                                          1998         1997
                                        ---------  -------------
<S>                                     <C>        <C>
INTANGIBLES AND OTHER ASSETS:
  Installed customer base, net . . . .  $   1,212  $           -
  Proven research and development, net        591              -
  Trademarks, net. . . . . . . . . . .        221              3
  Other intangibles and goodwill, net.        490            139
  Other assets . . . . . . . . . . . .        729            487
                                        ---------  -------------
                                        $   3,243  $         629
                                        =========  =============

OTHER CURRENT LIABILITIES:
  Salaries, wages and related items. .  $     770  $         123
  Deferred revenue . . . . . . . . . .        929             31
  Accrued warranty . . . . . . . . . .        680            423
  Accrued royalties. . . . . . . . . .        216            132
  Other accrued expenses . . . . . . .      2,158          1,280
  Current portion of long-term debt. .        264            181
                                        ---------  -------------
                                        $   5,017  $       2,170
                                        =========  =============
</TABLE>

     The  estimated  lives  for  property,  plant and equipment are 30 years for
buildings  and  range from 3 to 10 years for machinery and equipment.  Leasehold
improvements  are  amortized  over  the  shorter  of  the  useful  life  of  the
improvement  or  the  life  of the related lease.  The estimated lives of proven
research  and  development, installed customer base, and trademarks are 5 years,
15  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  -  PENSION,  POSTRETIREMENT  AND  OTHER  POSTEMPLOYMENT  BENEFITS
--------------------------------------------------------------------------

     Upon  consummation  of  the  Digital acquisition, Compaq 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  are 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.


                                        9
<PAGE>
NOTE  7  -  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  on  May  4,  1998.  Compaq  repurchased
approximately  892,000  shares  through  June  30,  1998,  for approximately $26
million.

NOTE  8  -  OTHER  INCOME  AND  EXPENSE
---------------------------------------

     Other  income  and  expense  consisted  of  the  following:

<TABLE>
<CAPTION>
                                         SIX MONTHS,   QUARTER ENDED
                                       ENDED JUNE 30,     JUNE 30,
                                       --------------  --------------
                                        1998    1997    1998    1997
                                       ------  ------  ------  ------
                                               (IN MILLIONS)
<S>                                    <C>     <C>     <C>     <C>
Interest and dividend income. . . . .  $(171)  $(119)  $ (86)  $ (63)
Interest (income) expense associated
 With hedging . . . . . . . . . . . .      2      (3)      3      (1)
Other interest expense. . . . . . . .     75      66      35      32 
Currency (gains) losses, net. . . . .     (2)     12      (6)      9 
Minority interest dividend. . . . . .      1       -       1       - 
Other, net. . . . . . . . . . . . . .     21      25       9      19
                                       ------  ------  ------  ------ 
                                       $ (74)  $ (19)  $ (44)  $  (4)
                                       ======  ======  ======  ======
</TABLE>

NOTE  9  -  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 of foreign currency
translation adjustments from certain subsidiaries.  Comprehensive income for the
six  months  ended  June  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>
                               SIX MONTHS,      QUARTER ENDED
                              ENDED JUNE 30,      JUNE 30,
                             ----------------  ----------------
                               1998     1997     1998     1997
                             --------  ------  --------  ------
                                       (IN MILLIONS)
<S>                          <C>       <C>     <C>       <C>
Net income (loss) . . . . .  $(3,616)  $ 671   $(3,632)  $ 257 
Other comprehensive loss. .       (5)    (13)       (2)     (3)
                             --------  ------  --------  ------
Comprehensive income (loss)  $(3,621)  $ 658   $(3,634)  $ 254 
                             ========  ======  ========  ======
</TABLE>

NOTE  10  -  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  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  60  million  and  59 million were not used in the
calculation  of  diluted  earnings  per common share in the six and three months
ended  June  30,  1998,  respectively,  due  to  the  net  loss for the periods.


                                        10
<PAGE>
NOTE  10  -  EARNINGS  PER  COMMON  SHARE  (CONTINUED)
------------------------------------------------------

Incremental  common  stock  equivalent  shares of 50 million and 52 million were
used  in  the calculation of diluted  earnings  per  common share in the six and
three months ended June 30, 1997, respectively.

     Stock options to purchase 11 million shares and 50 million shares of common
stock  for  the six-month periods and 13 million shares and 53 million shares of
common  stock  for  the  three-month  periods  ended  June  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  11  -  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. The Company 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 the two
cases,  and  remanded  for  further  proceedings.

NOTE  12  -  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  June  30,  1998,  there  were  declared and unpaid dividends of $8.9
million.

     The  summarized  unaudited  financial  information  for  Digital  and  its
consolidated subsidiaries is presented below. This summarized financial data was
derived from the fiscal period end financial statements of Digital prepared on a
stand-alone  basis  in  conformity with generally accepted accounting principles

                                        11
<PAGE>
NOTE  12  -  DIGITAL  SUMMARIZED  UNAUDITED  FINANCIAL  INFORMATION  (DIGITAL
-----------------------------------------------------------------------------
STAND-ALONE)
------------

and does not give affect to purchase accounting  adjustments.  The  stand-alone
Digital information  is  not  necessarily  indicative  of the future results of
Digital.  The Digital information does not necessarily reflect the results that
Digital  would  have  realized  had  the  acquisition  not  occurred.  Separate
financial statements and other disclosures concerning Digital  are  not  deemed
by management to be meaningful to holders of  the  Series  A  Preferred  Stock.

<TABLE>
<CAPTION>
                          JUNE 27,   DECEMBER 27,
                            1998        1997
                         ---------  -------------
                             (IN MILLIONS)
<S>                      <C>        <C>
Current assets. . . . .  $   5,028  $       6,428
Noncurrent assets . . .      4,296          2,365
Current liabilities . .      3,629          3,487
Noncurrent liabilities.      1,877          1,910
Stockholders' equity. .      3,818          3,396
</TABLE>

<TABLE>
<CAPTION>
                                   SIX MONTHS ENDED      QUARTER ENDED
                                  ------------------  ------------------
                                  June 27,  June 28,  June 27,  June 28,
                                   1998      1997       1998      1997
                                  --------  --------  --------  --------
                                              (IN MILLIONS)
<S>                               <C>       <C>       <C>       <C>
Product sales. . . . . . . . . .  $ 3,399   $ 3,830   $ 1,717   $ 1,994
Service revenues . . . . . . . .    3,026     2,947     1,517     1,469
Gross margin - product sales . .    1,122     1,390       535       742
Gross margin - service revenues.      931       915       444       457
Net income (loss). . . . . . . .      284       175       (58)      124
</TABLE>


                                        12
<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 six-month periods ended June 30, 1998 and
1997.

<TABLE>
<CAPTION>
                                                   SIX MONTHS,     QUARTER ENDED
                                                  ENDED JUNE 30,      JUNE 30,
                                                 ---------------  ---------------
                                                  1998     1997    1998     1997
                                                 -------  ------  -------  ------
<S>                                              <C>      <C>     <C>      <C>
Revenue:
    Product sales . . . . . . . . . . . . . . .    95.0%   98.0%    92.1%   98.0%
    Service revenue . . . . . . . . . . . . . .     5.0     2.0      7.9     2.0
                                                 -------  ------  -------  ------
                                                  100.0   100.0    100.0   100.0 
                                                 -------  ------  -------  ------

Cost of sales:
    Cost of product sales . . . . . . . . . . .    78.2    71.2     75.6    70.7 
    Cost of service revenue . . . . . . . . . .     3.3     1.4      5.4     1.4 
                                                 -------  ------  -------  ------
                                                   81.5    72.6     81.0    72.1 
                                                 -------  ------  -------  ------

Product sales gross margin. . . . . . . . . . .    16.8    26.9     16.6    27.4 
Service sales gross margin. . . . . . . . . . .     1.7     0.5      2.4     0.5 
                                                 -------  ------  -------  ------
                                                   18.5    27.4     19.0    27.9 
                                                 -------  ------  -------  ------

Selling, general and administrative expenses. .    15.9    12.1     18.0    12.2 
Research and development costs. . . . . . . . .     4.3     3.6      4.3     3.6 
Purchased in-process technology . . . . . . . .    28.1     1.9     55.5     3.8 
Restructuring and asset impairment charges. . .     3.4       -      6.7       - 
Other income and expense, net . . . . . . . . .    (0.6)   (0.1)    (0.8)   (0.1)
                                                 -------  ------  -------  ------
                                                   51.1    17.5     83.7    19.5 
                                                 -------  ------  -------  ------
Income (loss) before provision for income taxes  (32.6)%    9.9%  (64.7)%    8.4%
                                                 =======  ======  =======  ======
</TABLE>

OVERVIEW

     Compaq's  recent  emphasis  on  acquisitions,  combined  with  significant
operational growth, has expanded and enhanced its business model, which is built
on  open  industry-standard  products  with  leading enterprise technology and a
global  service  offering  providing enterprise solutions leadership.  As one of
the  top  three  global  information technology companies, Compaq is an 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  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


                                        13
<PAGE>
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  Digital  acquisition  was  accounted  for  as  a purchase transaction.
Accrued  restructuring  costs  of  $1.4  billion  related  to  Digital  employee
separations,  elimination  of  duplicate  facilities,  employee relocations, and
other  exit  costs  was  included  as  part  of  the  purchase price allocation.

REVENUES

     During  the  second quarter of 1998, Compaq continued its transition to the
Optimized  Distribution  Model,  reducing  channel  inventories  and  adopting a
market  "pull"  strategy   based  on  customer  demand.   As  anticipated,  this
transition  in  the  Compaq  business  model negatively impacted revenue for the
second  quarter, as the Company increased its focus on sales out of the channel.
Revenue  growth  during the second quarter increased 5.7%, year over year, while
unit  sales into the  channel  increased  17.0%  during  the  same  period.  The
disproportionate revenue growth as compared to unit shipment growth is primarily
due  to  promotional  activities  needed to support the transition period.  Unit
sales  out of the channel indicated strong demand for Compaq products during the
second  quarter  increasing  36%,  year  over  year.  Revenue growth in products
versus  services,  and by geographic component for the quarter and year to date,
is  set  forth  below.

     Total operating revenue increased $732 million, or 6.8%, for the six months
ended  June  30,  1998 over the comparable period in 1997.  Revenue from product
sales  for  the  six months ended June 30, 1998 increased $374 million, or 3.5%,
from  the  same  period in 1997.  Service revenue increased $358 million for the
first six months of 1998 over the prior year primarily due to the acquisition of
Digital.  Total  operating  revenue  from  North  America,  including  Canada,
decreased  3.6%  for  the six-month period ending June 30, 1998, compared to the
same  period  in  1997.  European operating revenue increased 23.4%, while other
international  revenue increased 5.5% for the first six months of 1998, compared
to  the  same  period  in  the  prior  year.  International  operating  revenue,
excluding  Canada,  represented 65% of total operating revenue for the six-month
period  of  1998.

     Total  operating  revenue  increased  $317  million, or 5.7%, for the three
months  ended  June  30,  1998 over the comparable period in 1997.  Revenue from
product sales for the three months ended June 30, 1998 decreased $33 million, or
0.6%,  from the same period in 1997.  Service revenue increased $350 million for
the  second quarter of 1998 over the prior year primarily due to the acquisition
of  Digital.  Total  operating  revenue  from  North  America, including Canada,
decreased  11.8% for the three-month period ending June 30, 1998 compared to the
same  period  in  1997.  European operating revenue increased 29.3%, while other
international revenue increased 17.0% in the second quarter of 1998, compared to
the  same  period in the prior year.  International operating revenue, excluding
Canada,  represented  65%  of total operating revenue for the quarter ended June
30,  1998.

     Without  the  inclusion  of  Digital products and services from the date of
acquisition,  total  operating  revenue  declined 3.7% and 14.7% for the six and
three-month  periods  ended  June 30, 1998 compared to the same periods in 1997,
respectively,  while  total  product  unit shipments  increased 24.9% and 10.7%,
respectively,  over  the  same  periods.   Price   reductions  and   promotional
activities  primarily on commercial  products  in North America more than offset
the increases in product unit  shipments.  The price  reductions and promotional
actions  were taken  to reduce channel inventories to achieve Compaq's Optimized
Distribution  Model goal of  four  weeks  of channel inventory by June 30, 1998,
as well as  to respond to competitive  pricing  conditions.  Increases  in  unit
shipments occurred in all geographies and in all segments, and were particularly
strong in the consumer sector.


                                        14
<PAGE>
GROSS  MARGIN

     Gross margin as a percentage of sales decreased to 18.5% from 27.4% for the
six-month  period  of  1998  and 1997, respectively, and decreased to 19% in the
second  quarter  of  1998  compared  to  27.9% in the comparable period of 1997.
Product  gross  margin  as  a percentage of product sales declined to 17.7% from
27.4%  for  the six-month period.  The decrease in product gross margin resulted
primarily  from  significant  pricing  and  promotion actions taken in the North
American  market  to  adjust  the  business  model to meet the goals of Compaq's
Optimized Distribution Model over the six-month period.  Service gross margin as
a  percentage of service revenue increased to 33.7% from 27.1% for the first six
months  of 1998 and 1997, respectively, and increased to 31.3% from 26.4% in the
second  quarter  of  1998  compared to the same period in 1997.  The increase in
service  gross  margin is primarily attributable to the inclusion of Digital for
the  last  two  weeks  of  June.

OPERATING  EXPENSES

     Compaq's  selling, general and administrative expense increased to 15.9% of
sales  in  the  year to date period as compared with 12.1% in the same period of
1997.  Selling,  general  and administrative expense increased to 18.0% of sales
in  the  second  quarter  compared  with  12.2% in the same period of 1997.  The
increase  in  Compaq's  selling, general and administrative expense is primarily
due  to  the  impact  of the pricing and promotional actions on sales during the
six-month  period.  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 as a percentage of revenue and
in absolute dollars due to the impact of Digital's existing cost structure,  new
product  introductions,  the expansion of its advertising and promotion programs
and  increases  in investments in the area of service and support.  Compaq plans
to  achieve  a  more  competitive  cost  structure through implementation of its
restructuring plans, which include initiatives to integrate operations of Compaq
and  Digital,  consolidate  duplicative facilities, improve service delivery and
reduce  overhead.  Compaq  expects  the  impact  of the restructuring actions to
reduce  expenses  over  the  long  term.

     Research  and  development  costs  increased  to  4.3% of sales for the six
months and second quarter of 1998, compared to 3.6% in the corresponding periods
of  1997.  The  increase  in  research  and  development  costs  is  primarily
attributable to the inclusion of Digital for two weeks of the period.  Compaq is
committed  to  continuing  a  significant  research  and  development program to
support  current  operations  and meet the demands of new product introductions.

PURCHASED  IN-PROCESS  TECHNOLOGY

     Upon  consummation  of the Digital acquisition, Compaq immediately expensed
$3.2  billion  representing  purchased  in-process  technology  that has not yet
reached  technological feasibility and has 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 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.

     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


                                        15
<PAGE>
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.

     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, 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.


                                        16
<PAGE>
     If  these  projects  are  not  successfully  developed,  the  sales  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.

RESTRUCTURING  AND  ASSET  IMPAIRMENT  CHARGES

     In  June  1998,  Compaq's  management  approved  restructuring plans, which
include  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 have been recorded in the second
quarter  related  to these initiatives, $1.4 billion of which relates to Digital
and  was  recorded  as  a  component  of  the purchase price allocation and $286
million relates to Compaq which was charged to operations.  Management is in the
process  of  finalizing  its  restructuring  plans  related  to  Digital,  and
accordingly,  the  amounts recorded related to Digital are based on management's
current  estimates 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 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  charges  include  $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 in North America and Europe.  The
restructure  plans  also include 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 exit costs
include  $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  contemplated
restructuring  actions  related  to  the  plan will be completed within the next
year.

     During  the  quarter, 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 abandonment and sale.
Additional  increases  in  depreciation  expense  may  occur  as asset lives are
adjusted  as  a  result  of  the  integration  process.

     Compaq's  cost  of  sales and selling, general and administrative costs are
expected  to increase in the short term, as a result of the Digital acquisition,
as  a  percentage of revenue and in absolute dollars.  Compaq expects the impact
of  the  restructuring  actions  to  reduce  expenses  over  the  longer  term.


                                        17
<PAGE>
OTHER  ITEMS

     Compaq  had  other income of $74 and $19 million for the six months and $44
million  and  $4  million  in the second quarter of 1998 and 1997, respectively.
This difference was primarily due to an increase in interest and dividend income
related  to  higher  combined cash and short-term investment balances, partially
offset  by  increased  interest  expense.

     The  translation  gains  and losses relating to the financial statements of
certain  of  Compaq's  international  subsidiaries,  net of offsetting gains and
losses  associated with hedging activities related to the net monetary assets of
these subsidiaries, are included in other income and expense and were a net gain
of  $6  million  in  the  second  quarter  of 1998, compared to a net loss of $9
million  in  the  second  quarter  of  1997.

LIQUIDITY  AND  CAPITAL  RESOURCES

     Compaq's  working  capital  decreased  to  $4.2  billion  at June 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  accrued  restructuring  costs.

     Compaq's  cash,  cash  equivalents, and short-term investments decreased to
$4.6 billion at June 30, 1998, from $6.4 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.  Approximately  $73  million of accounts receivable were sold in the
second  quarter  of 1998, compared to $1.1 billion in the quarter ended December
31,  1997.  From time to time,  Compaq  may sell accounts receivables when it is
economically beneficial to  do so.  Inventory levels increased to  $2.2 billion,
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 six months
ended  June  30, 1998,  cash  expenditures  for  restructuring  activities  were
$10  million.  Future  cash  expenditures  for  currently  planned restructuring
activities are estimated to be $1.7  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  892,000  shares  through  June  30,  1998,  for approximately $26
million.  In  June  1998,  Compaq utilized approximately $4.5 billion in cash to
complete  the  acquisition  of  Digital 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 totaled $257 million.  Compaq
estimates  that  capital  expenditures for land, buildings, and equipment during
the remainder of 1998 will be $360 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. Compaq has a $4 billion
syndicated credit facility (of which $1 billion expires in September 1998 and $3
billion  expires in September 2002) that was unused at June 30, 1998. Compaq has
established  a  commercial  paper  program,  supported  by the syndicated credit
facility,  which was unused at June 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.


                                        18
<PAGE>
     Other  planned  uses  of  cash include the efforts to develop the purchased
in-process  technology  related  to  the  Digital  acquisition 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 the 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.  The  estimated  costs  to  be incurred to
develop  the  Digital-related  purchased in-process technology into commercially
viable products are 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 be incurred to
develop  the  Microcom  purchased in-process technology into commercially viable
products  is  approximately  $500  million to be incurred 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  has not yet determined the impact that the adoption of FAS 133 will have
on  its  earnings  or  statement  of  financial  position.


                                        19
<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%.  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.  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 PC companies sell directly to end users
and,  particularly  in  the U.S., direct sales have increased as a percentage of
the  total  PC 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 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  the first half of 1998, Compaq implemented
programs  to  further  increase its competitiveness against direct sellers.  The
success  of  these  programs  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.  While Compaq intends
to  increase  its  service  revenue  through  this  acquisition, there are risks
associated with this new 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 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.


                                        20
<PAGE>
     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 by Microsoft
and  Intel.  Any  delays  in  shipments  of  new  products  resulting  from such
investigations  could delay shipments of 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 the Company 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.  The Company 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,  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, the Company could experience
disruptions  in  operations,  which  could  have  an  adverse  financial impact.


                                        21
<PAGE>
     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,  the  Company  must  obtain  a  license, purchase components
utilizing such technology from the owners of such technology or their licensees,
or  otherwise  acquire  rights  to  use  such  technology, which could result in
increased  costs.  Compaq  has entered into license agreements with key industry
participants,  including Intel, Microsoft and Texas Instruments. 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.  Compaq believes the cost of administering its Year
2000  readiness  program,  exclusive  of  any  customer  claims, will not have a
material  adverse  impact  on  future  earnings.  Since  there  is  no  uniform
definition of Year 2000 "compliance" and since all customer situations cannot be
anticipated,  particularly  those involving third party products, Compaq may see
an  increase  in  warranty  and  other  claims  as  a  result  of  the Year 2000
transition.  Such claims, if successful, could have a material adverse impact on
future  results.   See  "Item  1.  Business  - Year 2000 Transition" in Compaq's
Form  10-K  for  the  year  ended  1997  for  additional  information.


                                        22
<PAGE>
     Projects  to  address  Compaq's  internal information systems currently are
underway,  and  Compaq  is in the process of replacing some of its older systems
with  new  systems  that  are  able to handle the Year 2000 transition.  It will
continue to review internal system requirements and to correct further issues as
they  are identified.  Although Compaq's evaluation of these systems is still in
process, it believes that the impact of the Year 2000 transition on its internal
systems will not have a material adverse impact on future results.  In addition,
Compaq's  task  force  is  evaluating  the  impact  of  Year  2000 compliance of
suppliers,  is  asking suppliers about compliance, and is establishing Year 2000
compliance  requirements  for  suppliers.  Since  the  compliance  of  suppliers
depends  upon  their cooperation, failures remain a possibility and could have a
material  adverse  impact  on  future  results.

     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  anticipated  levels, or should
Compaq's  ability  to reinvest these earnings be reduced, Compaq's effective tax
rate  would  exceed  the  current  estimate.  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 wells 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  to  estimate  the  value-at-risk  based  on  estimates of
volatility  and  correlation  of  market  factors  drawn  from  J.P.  Morgan's
RiskMetrics  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


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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.

                           PART II.  OTHER INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS

     See  Note  11  to  Consolidated  Financial  Data.


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


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                                   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.




     August  14,  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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