Compaq said it still has not used roughly $550 million of the $1 billion authorized by its board in December for buying back company shares. HP said it is authorized to buy back about $1.8 billion worth of stock.
"At current price levels, we believe Compaq's stock offers a tremendous investment opportunity for the company," Compaq CEO Michael Capellas said in a statement. "We are confident in the future of the American economy and the strong position that the combination of Hewlett-Packard and Compaq will hold."
It is too soon to say what impact the buybacks could have on the merger. But the buybacks--along with many other factors, such as the exercise of employee stock options--could affect how much of the combined company will be owned by shareholders of the respective companies. When the deal was announced, it was planned that HP shareholders would own approximately 64 percent of the combined company and Compaq shareholders would have 36 percent.
HP and Compaq were among a host of companies that increased their stock buybacks Monday. For example, General Electric said it was accelerating a share repurchase program, while chip giant Intel said it would expand a buyback program by 300 million shares.
On Sept. 3, Hewlett-Packard announced it intended to buy Compaq in a stock deal valued at the time at $25 billion, although the value of the deal since has plummeted along with shares of both companies.
Stock buybacks allow companies to reduce the total number of shares outstanding, thus improving a company's earnings on a per-share basis.
"We have enormous confidence in the underlying strength of the U.S. economy and the long-term health of the technology sector," HP CEO Carly Fiorina said in a statement. "We're also confident in the power of the HP-Compaq combination and the value it will create for shareowners, customers, partners and employees."