Compaq executives also said that they expected the unit that sells personal computers to businesses to return to profitability this year.

In May 1990 Compaq executives met with Banyan management.

Compaq executives said that the company would be able to sustain its efficiency gains for the remainder of the year and beyond.

Compaq executives have said recently that the company would have been even worse off without the Digital merger.

"Some of the discussions inside the company got really ugly," said a former Compaq executive, who insisted on not being identified.

And Compaq executives are encouraged by the results.

In the question-and-answer session that followed prepared remarks by Compaq executives, only two analysts, instead of the usual dozens, asked questions.

Compaq executives have said that they expect the company's profit margins, which were 24.5 percent in the last quarter, to expand, not shrink.

If its new strategy succeeds, Compaq executives said, the company could lower prices more than 15 percent on some of its desktop computers.

He and other Compaq executives have compared the company's latest moves to the drastic price cuts it introduced in 1992.