Compaq plans $1bn purchase of own stock

Compaq wants to buy back $1 billion worth of shares, taking advantage of the dip in tech stocks and bolstering the company against expectations of poor PC sales during the current financial quarter.

Compaq's announcement won approval on Wall Street, pushing up tech stocks in general - Nasdaq gained 1.8 per cent.

"At current price levels, we believe Compaq's stock offers a tremendous investment opportunity for the company," said Compaq boss Michael Capellas. As and when hi-tech stock prices recover, Compaq can sell again and cash in. If not, it takes shares out of circulation, which can increase the value of those that remain in the market. Earnings per share will increase too.

Compaq isn't going to splash out - instead, it will buy shares back in smaller units, taking advantage of market conditions. And if that pushes the price up - as it may well do; there's nothing like clear demand to boost prices - then that's good for Compaq too. ®