Compaq Computer Corp., the world's largest seller of personal computers, announced Tuesday a five-for-two stock split in the form of a stock dividend. The company's stock rose as investors viewed the move as a bullish signal for Compaq's future, traders said.
Shareholders of record as of July 14 will receive three additional shares of common stock for every two shares they own on that date, Compaq said. The new shares will be distributed on or about July 28.
Compaq stock gained $1.125 to $100.625 in consolidated afternoon trading on the New York Stock Exchange.
Compaq said it had 276 million shares outstanding as of Monday. Upon completion of the split, the number will increase to 690 million shares outstanding. In addition, the number of shares that would be issued in the recently announced proposed merger with Tandem Computers Inc. would be appropriately adjusted to reflect the stock split, Compaq said.
Wall Street analysts said the stock split will simply drive more retail interest in Compaq. "Companies like to have their stock trade at prices that are attractive to various levels of investors," said Mark Specker, a SoundView Financial analyst.
Traders also said that Compaq shares were likely buoyant because Compaq is one of the few technology companies that is expected to beat Wall Street forecasts this quarter, in an otherwise disappointing second quarter so far. "I think it will comfortably exceed expectations," said Specker.
In 1996, the Houston-based company earned $1.3 billion on worldwide sales of $18.1 billion.
Many technology companies have pre-announced earnings shorftalls this quarter, beginning with Intel Corp., which cited weaker-than-expected demand, especially in Europe. Seagate Technology, Gateway 2000 Inc. and Cyrix Corp. have also warned of disappointing earnings.
