- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 14, 1998
COMPAQ COMPUTER CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-9026 76-0011617
---------------------------- ------------ -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
20555 SH 249
HOUSTON, TEXAS 77070
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(281) 370-0670
----------------------------------------------------
(Registrant's telephone number, including area code)
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
set forth in Compaq Computer Corporation's Form 8-K dated June 11, 1998, is
hereby amended to read in its entirety as follows:
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
The financial statements required to be filed were previously reported in
Digital's Annual Report on Form 10-K for the fiscal year ended June 28, 1997 and
Quarterly Reports on Form 10-Q for the quarters ended September 27, 1997,
December 27, 1997 and March 28, 1998, respectively, and incorporated herein by
reference.
(b) PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements are
presented for illustrative purposes only and are not necessarily indicative of
the combined financial position or results of operations for future periods or
the results that actually would have been realized had Digital and Compaq been a
combined company during the specified periods. The pro forma combined financial
statements, including the notes thereto, are qualified in their entirety by
reference to, and should be read in conjunction with, the historical
consolidated financial statements of Digital and Compaq, including the notes
thereto, incorporated herein by reference.
The following pro forma combined financial statements give effect to the
acquisition of Digital using the purchase method of accounting. The pro forma
combined financial statements are based on the respective historical audited and
unaudited consolidated financial statements and the notes thereto of Digital and
Compaq, which are incorporated herein by reference. The purchase price was
allocated to the estimated fair value of assets acquired and liabilities
assumed. The preliminary purchase price allocation is 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. Further, management expects the Digital
restructuring plans to be finalized by the end of the year.
The pro forma combined balance sheet assumes that the business combination
took place March 31, 1998 and combined Digital's unaudited March 28, 1998
consolidated balance sheet and Compaq's unaudited March 31, 1998 consolidated
balance sheet. The pro forma combined statements of income assume the business
combination took place as of January 1, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COMPAQ COMPUTER CORPORATION
-----------------------------
Dated: August 14, 1998 By: /S/ Linda S. Auwers
-------------------------
Linda S. Auwers
Vice President and
Associate General Counsel
<PAGE>
<TABLE>
<CAPTION>
COMPAQ AND DIGITAL
UNAUDITED PRO FORMA COMBINED AND CONDENSED BALANCE SHEET
(IN MILLIONS)
COMPAQ DIGITAL PRO FORMA
MARCH 31, MARCH 28, ADJUSTMENTS PRO FORMA
1998 1998 (NOTE 2) COMBINED
---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . $ 7,107 $ 1,498 $ (3,843) (a)(b) $ 4,762
Short-term investments . . . . . . . . . . . . . . - 919 - 919
Accounts receivable, net . . . . . . . . . . . . . 2,743 2,705 (17) (b)(c) 5,431
Inventories. . . . . . . . . . . . . . . . . . . . 1,256 1,188 20 (b)(c) 2,464
Deferred income taxes. . . . . . . . . . . . . . . 594 66 1,369 (d)(e) 2,029
Other current assets . . . . . . . . . . . . . . . 207 587 (19) (b)(c) 775
---------- ----------- ------------- ----------
Total current assets . . . . . . . . . . . . . . 11,907 6,963 (2,490) 16,380
Property, plant and equipment, less
accumulated deprecation. . . . . . . . . . . . . . 2,028 2,112 (1,300) (b)(c)(d) 2,840
Deferred income taxes. . . . . . . . . . . . . . . . - - 862 (d)(e) 862
Intangible and other assets. . . . . . . . . . . . . 645 282 1,943 (d)(h) 2,870
---------- ----------- ------------- ----------
$ 14,580 $ 9,357 $ (985) $ 22,952
========== =========== ============= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . $ 2,812 $ 786 $ 85 (f) $ 3,683
Income taxes payable . . . . . . . . . . . . . . . 257 154 - 411
Accrued restructuring costs. . . . . . . . . . . . - 217 1,280 (g) 1,497
Other current liabilities. . . . . . . . . . . . . 2,037 2,569 120 (c) 4,726
---------- ----------- ------------- ----------
Total current liabilities. . . . . . . . . . . . 5,106 3,726 1,485 10,317
Long-term debt . . . . . . . . . . . . . . . . . . . - 741 130 (c) 871
Postretirement and other
postemployment benefits. . . . . . . . . . . . . . - 1,137 (740) (h) 397
Minority interests . . . . . . . . . . . . . . . . . - - 420 (a) 420
Stockholders' equity:
Preferred stock. . . . . . . . . . . . . . . . . . - 4 (4) (a) -
Common stock and capital in excess of par
value (Compaq: 1,519 million shares;
Digital: 147 million shares; and 1,658 million
shares on a pro forma combined basis). . . . . . 2,153 4,000 533 (a) 6,686
Retained earnings. . . . . . . . . . . . . . . . . 7,321 139 (3,199) (a)(d) 4,261
Treasury stock, at cost. . . . . . . . . . . . . . - (390) 390 (a) -
---------- ----------- ------------- ----------
Total stockholders' equity . . . . . . . . . . . 9,474 3,753 (2,280) 10,947
---------- ----------- ------------- ----------
$ 14,580 $ 9,357 $ (985) $ 22,952
========== =========== ============= ==========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
<PAGE>
<TABLE>
<CAPTION>
COMPAQ AND DIGITAL
UNAUDITED PRO FORMA COMBINED AND CONDENSED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
DIGITAL
COMPAQ TWELVE-MONTH PRO FORMA
YEAR ENDED PERIOD ENDED ADJUSTMENTS PRO FORMA
DECEMBER 31, 1997 DECEMBER 27, 1997 (NOTE 2) COMBINED
------------------ ------------------- ------------- ----------
<S> <C> <C> <C> <C>
Revenue:
Product sales . . . . . . . . $ 24,122 $ 7,229 $ - $ 31,351
Service revenue . . . . . . . 462 5,832 - 6,294
------------------ ------------------- ------------- ----------
24,584 13,061 - 37,645
------------------ ------------------- ------------- ----------
Cost of sales:
Cost of product sales . . . . 17,500 4,592 91 (b)(d) 22,183
Cost of service revenue . . . 333 4,012 (18) (d) 4,327
------------------ ------------------- ------------- ----------
17,833 8,604 73 26,510
------------------ ------------------- ------------- ----------
Selling, general and
administrative expense. . . . 2,947 3,154 98 (b)(d) 6,199
Research and development costs. 817 1,043 - 1,860
Purchased in-process technology 208 - - (d) 208
Other (income) and expense, net 21 (59) 228 (i) 190
------------------ ------------------- ------------- ----------
3,993 4,138 326 8,457
------------------ ------------------- ------------- ----------
Income before provision for
income taxes. . . . . . . . . 2,758 319 (399) 2,678
Provision for income taxes. . . 903 44 (127) (b)(d)(i) 820
------------------ ------------------- ------------- ----------
Net income. . . . . . . . . . . 1,855 275 (272) 1,858
------------------ ------------------- ------------- ----------
Dividends on preferred stock. . - 36 (36) (a) -
------------------ ------------------- ------------- ----------
Net income available to common
stockholders. . . . . . . . . $ 1,855 $ 239 $ (236) $ 1,858
================== =================== ============= ==========
Earnings per common share:
Basic . . . . . . . . . . . . $ 1.23 $ 1.58 - $ 1.13
Diluted . . . . . . . . . . . $ 1.19 $ 1.57 - $ 1.09
Shares used in computing
earnings per common share:
Basic . . . . . . . . . . . 1,505 151 139 (3) 1,644
Diluted . . . . . . . . . . 1,564 152 140 (3) 1,704
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
<PAGE>
<TABLE>
<CAPTION>
COMPAQ AND DIGITAL
UNAUDITED PRO FORMA COMBINED AND CONDENSED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
COMPAQ DIGITAL
THREE-MONTH THREE-MONTH PRO FORMA
PERIOD ENDED PERIOD ENDED ADJUSTMENTS PRO FORMA
MARCH 31, 1998 MARCH 28, 1998 (NOTE 2) COMBINED
---------------- ---------------- ------------- -----------
<S> <C> <C> <C> <C>
Revenue:
Product sales. . . . . . . . $ 5,575 $ 1,682 $ - $ 7,257
Service revenue. . . . . . . 112 1,509 - 1,621
---------------- ---------------- ------------- -----------
5,687 3,191 - 8,878
---------------- ---------------- ------------- -----------
Cost of sales:
Cost of product sales. . . . 4,602 1,095 23 (b)(d) 5,720
Cost of service revenue. . . 62 1,022 (5) (d) 1,079
---------------- ---------------- ------------- -----------
4,664 2,117 18 6,799
---------------- ---------------- ------------- -----------
Selling, general and
administrative expense . . . 785 739 24 (b)(d) 1,548
Research and development costs 245 261 - 506
Purchased in-process technology - - - (d) -
Other income and expense, net. (30) (305) 57 (a)(b)(d)(i) (278)
---------------- ---------------- ------------- -----------
1,000 695 81 1,776
---------------- ---------------- ------------- -----------
Income before provision for
income taxes . . . . . . . . 23 379 (99) 303
Provision for income taxes . . 7 37 (16) (b)(d)(i) 28
---------------- ---------------- ------------- -----------
Net Income . . . . . . . . . . 16 342 (83) 275
---------------- ---------------- ------------- -----------
Dividends on preferred stock . - 9 (9) (a) -
---------------- ---------------- ------------- -----------
Net income available to common
stockholders . . . . . . . . $ 16 $ 333 $ (74) $ 275
================ ================ ============= ===========
Earnings per common share:
Basic. . . . . . . . . . . . $ 0.01 $ 2.27 - $ 0.17
Diluted. . . . . . . . . . . $ 0.01 $ 2.23 - $ 0.16
Shares used in computing
earnings per common share:
Basic. . . . . . . . . . . 1,523 147 139 (3) 1,662
Diluted. . . . . . . . . . 1,584 149 140 (3) 1,724
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The pro forma combined balance sheet assumes that the business combination
took place March 31, 1998 and combines Digital's unaudited March 28, 1998
consolidated balance sheet and Compaq's unaudited March 31, 1998 consolidated
balance sheet.
The pro forma combined statements of income assume the business combination
took place as of the beginning of the periods presented. The income statement
with the period ending in December combines Digital's unaudited consolidated
statement of income for the twelve-month period ended December 27, 1997 and
Compaq's consolidated statement of income for the year ended December 31, 1997.
The income statement with the period ending in March combines Digital's
unaudited consolidated statement of income for the three-month period ended
March 28, 1998 and Compaq's unaudited consolidated statement of income for the
three-month period ended March 31, 1998. Digital's 1997 fiscal year ended on
June 28, 1997. Digital's twelve-month period ended December 27, 1997 has been
derived by combining the unaudited results for the quarters ended March 28, June
28, September 27, and December 27, 1997.
On a combined basis there were no material transactions between Digital and
Compaq during the period presented.
There are no material differences between the accounting policies of
Digital and Compaq.
The pro forma combined provision for income taxes may not represent the amounts
that would have resulted had Digital and Compaq filed consolidated income tax
returns during the period presented.
NOTE 2. PRO FORMA ADJUSTMENTS
The purchase price was allocated to the estimated fair value of assets
acquired and liabilities assumed. The preliminary purchase price allocation is
based on Compaq's estimates of fair value. The pro forma adjustments presented
are as of March 31, 1998. 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. Further, management expects the Digital
restructuring plans to be finalized by the end of the year.
(a) Adjustments to record the components of the purchase price -- $4.5
billion in cash, $4.3 billion in Compaq Common Stock and $249 million in Compaq
Common Stock options. The cash and Compaq Common Stock were issued in exchange
for outstanding shares of Digital Common Stock ($30 in cash and 0.945 shares of
Compaq Common Stock for each share of Digital Common Stock) and the Compaq
Common Stock options were issued in exchange for outstanding Digital Common
Stock options. The value of the Compaq Common Stock issued is based on the
share value of approximately $30 calculated as the average market price of
Compaq Common Stock during the five business days immediately preceding and
subsequent to the date of the Merger Agreement. The value of the Compaq Common
Stock options is based on the estimated fair market value of these options as of
June 11, 1998, the date the transaction was consummated, using the Black-Scholes
model.
Adjustment reflects the reclassification of the Digital Preferred Stock to a
minority interest of the combined company. Accordingly, the dividends on the
Digital Preferred Stock have also been reclassified to other income and expense
in the Pro Forma Combined Statements of Income.
7
<PAGE>
Adjustment also reflects the elimination of Digital stockholders' equity.
(b) Adjustments to reflect the agreement by Digital and Intel, which was
announced on October 27, 1997, to establish a broad-based business relationship,
including the sale of assets used in Digital's semiconductor manufacturing
operations to Intel for a purchase price equal to the net book value of the
transferred assets including approximately $625 million of property, plant and
equipment, a supply agreement and other related agreements. The transaction was
consummated on May 18, 1998.
(c) Adjustment to reflect the fair value of accounts receivable,
inventories, property, plant and equipment, accrued liabilities and financial
instruments.
(d) Estimated valuation of tangible and intangible assets, including
purchased in-process technology, resulting from the preliminary allocation of
the purchase price. Valuation of the intangible assets acquired was conducted
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
$4.4 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.
The table below is a summary of the preliminary 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:
<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 . . . $ 1,498 $ (696) $ 802
Purchased in-process technology . . 5,722 (2,661) 3,061
Intangible assets:
Proven research and development 1,055 (491) 564
Installed customer base . . . . 2,150 (1,000) 1,150
Trademarks. . . . . . . . . . . 391 (182) 209
Other assets. . . . . . . . . . . . 596 (277) 319
Deferred tax liability. . . . . . . (1,078) 926 (152)
</TABLE>
Management estimates that $3.1 billion of the purchase price represents
purchased in-process technology that has not yet reached technological
feasibility and has no alternative future use. This amount was expensed as a
non-recurring, non-tax deductible charge upon consummation of the acquisition.
This amount has been reflected as a reduction to stockholders' equity and has
not been included in the pro forma combined statement of income due to its
non-recurring nature.
The value assigned to purchased in-process technology 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 values.
8
<PAGE>
The nature of the efforts to develop the purchased in-process technology into
commercially viable products principally relates to 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. The efforts to develop the purchased
in-process technology also include developing firmware and diagnostic software,
device driver development and testing of the technology of compatibility and
interoperability with other applications. The estimated costs to be incurred to
develop the 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.
The resulting net cash flows from such projects are based on Compaq management's
estimates of revenues, cost of sales, research and development costs, selling,
general and administrative costs, and income taxes from such projects. These
estimates are based on the following assumptions.
- - The estimated revenues project average compounded annual revenue growth
rates of 8% to 39% during 1998-2001 depending on the product areas. For
instance, UNIX/Open VMS compounded annual growth rates are 8% and storage rates
are 39%. Estimated total revenues from the purchased in-process product areas
peak in the year 2001 and decline rapidly in 2002-2005 as other new products are
expected to enter the market. These projections are based on Compaq management's
estimates of market size and growth (which 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 products, Compaq marketing and distributing the resulting products
through Compaq's resellers and Compaq 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 (g), 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.
9
<PAGE>
Discounting the net cash flows back to their present values 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.
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.
Intangible assets of $2.0 billion are comprised of proven research and
development of $564 million, installed customer base of $1.2 billion and
trademarks of $209 million which have estimated useful lives of 5 years, 15
years and 5 years, respectively.
The estimated annual amortization charge to income related to intangible assets
acquired and reductions in depreciation expenses resulting from the sale
described in (b) above and the allocation of the excess value over cost to
property, plant and equipment approximates $150 million. This charge and the
related tax effect are reflected in the pro forma combined statements of income.
(e) Adjustment to reduce the valuation allowance related to Digital deferred
tax assets by $2.4 billion based on a preliminary estimate of the tax assets
that can be utilized by the combined company, offset by the establishment of
$150 million of deferred tax liabilities resulting from the purchase price
allocation.
(f) Adjustment to reflect estimated acquisition-related expenses. The
impact of the fees and expenses has been reflected in the pro forma combined
balance sheet and statement of income as an increase in the purchase price of
the transaction and is allocated to the assets acquired and liabilities assumed,
based upon their estimated fair values.
(g) Adjustment reflects estimate of accrued restructuring charges related to
Digital to be incurred in connection with the acquisition. The restructuring
plans include initiatives to integrate the operations of Compaq and Digital,
consolidate duplicative facilities, improve service delivery and reduce
overhead. 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. Areas where management
estimates may be revised primarily relate to Digital employee relocation costs,
facility closure costs and other exit costs. Adjustments to accrued restructure
costs related to Digital will be recorded as an adjustment to the preliminary
purchase price allocation. Accrued restructuring charges include $999 million
representing the cost of involuntary employee separation benefits related to
approximately 14,700 Digital employees. The restructuring plans also include
costs of $272 million associated with the closure of office space, distribution
and manufacturing space. Further, other exit costs related to Digital include
$99 million related to relocation of Digital employees and $88 million related
to the costs of terminating certain Digital contractual relationships. Compaq
expects that most of the restructuring actions related to the plan will be
completed within the next year.
10
<PAGE>
(h) Adjustment to reflect the fair value of assets and liabilities relating
to post retirement and other post employment benefits (primarily related to the
elimination of unrecognized gains).
(i) Adjustment to reflect the reversal of interest income and related tax
effect on the pro forma adjustment to cash resulting from the acquisition. The
assumed rate of return on the cash balance was 5%.
NOTE 3. PRO FORMA EARNINGS PER COMMON SHARE
Basic pro forma earnings per common share for the periods presented were
calculated based on the conversion of 147 million shares of Digital Common Stock
outstanding at December 27, 1997 into 139 million shares of Compaq Common Stock.
Diluted earnings per common share at December 31, 1997 included 60 million
equivalent Compaq common shares of which one million was attributable to Digital
stock options. Diluted earnings per common share at March 31, 1998 included 62
million equivalent Compaq common shares of which one million was attributable to
Digital stock options.
11
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-40729), to
the incorporation by reference in the Registration Statements on Form S-8 (Nos.
333-56677, 333-43595, 333-42375, 333-34743, 333-34699, 333-31265, 33-44115,
33-31819, 33-23504, 33-7499, 2-89925, 33-10106, 33-38044, 33-16987, 33-62603)
and to the incorporation by reference in the Post-Effective Amendment No.1 on
Form S-8 to Form S-4 (No. 333-51903) of Compaq Computer Corporation of our
report dated July 24, 1997 on our audits of the consolidated financial
statements of Digital Equipment Corporation as of June 28, 1997 and June 29,
1996 and for the years ended June 28, 1997, June 29, 1996 and July 1, 1995,
which are incorporated by reference on Form 8-K/A of Compaq Computer
Corporation dated August 14, 1998.
/s/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
August 14, 1998
12
<PAGE>
