COMPAQ PROFITS UP IN '96 : 2ND-QUARTER REPORT BEATS EXPECTATIONS.

Byline: Laurence Zuckerman The New York Times

Bolstering the confidence of nervous technology investors, the Compaq Computer Corp. reported surprisingly strong second-quarter earnings Wednesday and predicted that its business would remain robust for the rest of the year.

Compaq, the world's largest seller of personal computers, said earnings rose 8.5 percent, to $267 million, or 97 cents a share, from $246 million, or 90 cents a share, in the comparable period last year.

The results surpassed the forecasts of 31 Wall Street analysts surveyed by First Call, which ranged from 82 to 95 cents a share.

Revenue for the quarter was disappointing because of weak sales in Europe. It grew 14 percent, to $4 billion, from $3.5 billion a year earlier. But what pleased Wall Street was Compaq's 23 percent gross profit margin, up from 21 percent in the first quarter, and the company's contention that the margin could remain at that level.

``The quarter was good and, more importantly, the outlook is even better that they can maintain the margins,'' said David Wu, a computer analyst with the Chicago Corp. in New York. After Compaq's announcement, he raised his earnings estimate for the year to $4.35 a share from his previous forecast of $4.20.

Several other analysts also raised their estimates and upgraded their recommendations of the stock to ``buy'' after Compaq executives said in a conference call that the company was comfortable with Wall Street's average earnings forecast of $1.03 a share for the third quarter.

The midmorning dose of optimism helped reverse a steep early decline in the stock market, after three days in which there had been heavy selling of many technology shares. Compaq shares ended the day at 48-1/4, up 3-1/4, on the New York Stock Exchange.

But it is unclear how much Compaq's gains can be translated even to other makers of personal computers, much less to the technology sector as a whole.