Conference 7.286::digital

    
    Wall Street Journal, Wednesday Feb. 21
    
    9000 problems-Electronics News, Monday Feb. 19
    
    more 9000 problems-Boston Globe, Wednesday Feb. 21
    
    This is the source of the bad news.  It can only get better (I hope).
    

>          <<< Note 1034.0 by DELREY::WEYER_JI "Music for the Mind" >>>
>                          -< Digital makes the News >-
>
>    ...loss in quarterly earnings and rumors of early retirement plan being
>    offered to employees.
>    
>    That was all the news I heard, and there was nothing written up yet in
>    the Los Angeles Times that I could find.  Can anyone shed some light on
>    this?  What does it mean?  How does the news media get ahold of
>    information like this?  When and How are Digital employees going to get
>    the real information; or must we rely on news broadcasts?
>    

I think other notes in this conference have some information (I could be
mixing this conference up with BMT::INVESTING.  The Wall Street Journal (WSJ)
had an article this morning (at least in the New England edition) in which
it attributes a quote to KO acknowledging the possibility of a loss this
quarter.  KO was quoted for three words, so the context in which he spoke
is only implied.  The Boston Globe has an article claiming reports of delays
in the shipping of the VAX 9000.  The WSJ also indicated that there were rumors
of an early retirement plan.  Keep in mind that such rumors could stem from
contingency planning; an exercise that all good management performs regularly.
Then again, it could be true.  As far as specific financial information is
concerned; I believe it is improper/illegal for a company to disclose data
that could affect the stock price to insiders (eg: employees) before making
such information public.  Therefore, expect to hear rumors and speculation
before you learn facts.  Certainly, a major delay in the shipment of a new
product, the offering of employment buyout to a large number of employees, and
red ink for a quarter are all data that could affect the price of our stock
and thus should not be told to insiders before the general public.

    My understanding is that there are no current plans for an 
    "early retirement plan".  What is expected is an expansion of
    the "buy out" package which has been available to those in TMP.
    
    
    
    
    Bob

DIGITAL FACES LOSS

	"Digital Equipment, Facing Possible Loss for Its 3rd Period, Mulls
	 Severance Plan"  (WSJ, 02/21/90)

Digital is considering a voluntary severance program to reduce its work 
force by 8,000.  With U.S. sales in a deep slump and expenses rising as the 
company makes long-term investments in new products, Ken Olsen won't rule 
out a loss in the fiscal third quarter ending March 31.  Mark Steinkrauss 
confirms that a "substantial expansion" of an existing voluntary severance 
plan is among options under consideration.  But he declined to discuss 
details and wouldn't say when such a program might be put in place.  
Digital yesterday denied reports of production problems with the VAX 9000 
and says that it still expects to begin shipping the first of the new models 
in the fiscal fourth quarter.  Like any new computer, the VAX 9000 has had 
its share of bugs, but no substantive problems that would affect the 
shipping schedule.

    I had not considered the restrictions on "insider trading". It would
    not be fair to inform employees who are stockholders before the general
    public who are stockholders.  It seems that the radio station pulled
    their information from that Wall Street Journal article.  The WSJ must
    have had a good reporter on that story to sniff out the news they
    printed.
    
    -Still curious employee-

FULL TEXT:

THE WALL STREET JOURNAL
WEDNESDAY, FEBRUARY 21, 1990
PAGE A3
BY JOHN R. WILKE

Digital Equipment Corp., facing the possibility of the first quarterly 
loss in its 32-year history, is considering a voluntary severance 
program to reduce its work force by 8,000.

With U.S. sales in a deep slump and expenses rising as the company 
makes long-term investments in new products, the company's president 
and founder, Kenneth H. Olsen, won't rule out a loss in the fiscal 
third quarter ending March 31.  "It could happen," he concedes.

Few would have imagined it possible six months ago.  The Maynard, 
Mass., computer maker, the world's second-largest, has a huge cash 
hoard, almost no debt, an army of loyal customers and a triple-A 
balance sheet.

But the prospect of a loss, company executives say, has prompted 
Digital to consider the severance program to reduce its swollen work 
force.  The move would echo International Business Machines Corp.'s 
recent announcement of big cutbacks in its payroll.

Although Digital executives still are debating how to deal with the 
company's sky-high cost structure, the most likely option - now under 
consideration by the executive committee - is to eliminate 8,000 of 
the company's 125,900 workers through a severance program.

"They're serious about it this time," says a former executive.  "All 
across the company, people are waiting for the shoe to drop."

FEW DETAILS

Mark Steinkrauss, director of investor relations, confirms that a 
"substantial expansion" of an existing voluntary severance plan is 
among options under consideration.  But he declined to discuss details 
and wouldn't say when such a program might be put in place.

Digital's efforts to cut its staff haven't been very effective to 
date.  The company's work force actually grew by 400 last quarter, for 
example.  And a voluntary severance package offered last year to 700 
manufacturing and administrative workers drew just 235 takers.

An expanded severance program would be welcomed by investors and might 
be enough to keep intact Digital's long tradition of avoiding layoffs. 
 But such a move could result in a big charge to earnings, Mr. 
Steinkrauss says.

According to people familiar with the proposed severance plan, workers 
accepting a buy-out could hold on to liberal company benefits and 
participate in a lucrative stock-option plan for five years.

Despite his reluctance to pare the payroll, Mr. Olsen is leading the 
campaign to cut costs, executives insist.  In memos and meetings, he 
rails against overhead.  Managers have been ordered to cut budgets for 
the second time in six months.  Paralled engineering efforts are being 
canceled.  "Everyone is feeling the heat," says a Digital engineer.

Still, Mr Olsen readily admits, "it's already to late in the quarter" 
to make major new cuts to avoid a possible loss.  And while 
emphasizing that the company hasn't publicly predicted a loss for the 
current quarter, he notes that the difference between net income and a 
loss "actually amounts to a very small shift in a very large number."  
In other words, if revenue falls short by just a few percentage 
points, a loss could indeed be the result, he said.

CAUTIOUS STANCE

Mr. Olsen adds that it's too early to tell how the quarter will turn 
out - like many computer makers, Digital often doesn't know until the 
final hours of the last day of the period - but he restated the 
cautious stance the company has taken in recent weeks.

After years of explosive growth, Digital has been hurt by a slowdown 
across the computer industry and a shift away from its traditional 
minicomputers toward networks of smaller personal computers.  In its 
fiscal second quarter, sales rose less than 1%, to $3.18 billion.

Since January, analysts have nervously nudged earnings estimates 
lower.  Marc G. Schulman of UBS Securities Inc. recently chopped his 
estimate for the quarter ending March 31 from 55 cents a share to 25 
cents.  "We cannot rule out the possibility of a loss," he said.  
Prudential Bache's Laura Conigliaro forecasts net income of just 66 
cents a share, but she adds that "it's really much too close to call."

In the year-ago third quarter, Digital reported net income of $2.05 
per share.  For the full year, analysts now estimate per-share 
earnings of only about $5.40 a share, down sharply from last year's 
net of $8.45.

In composite New York Stock Exchange trading yesterday, Digital shares 
fell $1.875 apiece to close at $74 in a broadly lower market.

Digital is expected to show a sharp improvement in sales and earnings 
in the 1991 fiscal year, which begins July 1, as the new VAX 9000 
mainframe computer begins shipping.  Customer surveys show strong 
pent-up demand for the new line, which analysts say could contribute 
new sales of more than $1 billion during the fiscal year.

With profit margins eroding across much of the rest of its business, 
there's no room for error in the launch of the VAX 9000.  Digital 
yesterday denied reports of production problems and says that it still 
expects to begin shipping the first of the new models in the fiscal 
fourth quarter.  Like any new computer, the VAX 9000 has had its share 
of bugs, but no substantive problems that would affect the shipping 
schedule, says Joseph Zeh, the line's engineering manager.

Still, the lack of a high-end line has hurt Digital.  And it has 
launched an expensive assault on the fast-growing, intensely 
competitive workstation business, where it ranks third behind Silicon 
Valley rivals Sun Microsystems Inc. and Hewlett-Packard Co.

Another potential problem, says Mr. Schulman, the analyst, is a 
program under which Digital has offered buyers waiting for the 9000 a 
midrange VAX6000 until the larger machine is ready.  The offer "will 
have a materially negative impact on the company's operating results" 
for both its fiscal third and fourth quarters, Mr. Schulman warns.  A 
Digital spokesman disagreed with that assessment, saying that only 
about 25% of prospective customers have accepted the offer.

Mr. Olsen has weathered worse storms.  After each downturn, he says, 
Digital has come back for a new cycle of growth.  So he insists on 
spending for the long term, and dismisses less-patient critics.  "Wall 
Street doesn't approve of investing in the future," he says.

    
    Ken will apear on WCVB-TV (Boston) "Chronicle" at 7:30 pm on 2/28/90.
    
    The subject matter is our financial condition and what he plans
    to do about it.
    
    Y'all stay tuned now....

    REF: <<< Note 1034.7 >>>
    
    >> Ken will apear on WCVB-TV (Boston) "Chronicle" at 7:30 pm on 2/28/90.
    
    >> The subject matter is our financial condition and what he plans
       to do about it.  >>
    
    For the benefit of those of us in the field, perhaps someone up in New
    England who will be watching could tape the dialogue on his or her VCR
    and then have it transcribed and posted here?  We in the field would be
    most grateful -- thanks in advance!
    

	I believe Cronicle is also on the Lifetime channel for those that
	get that.. Call your cable service.. Also, check with your
	libraries, they may copy this..

	Should be interesting..

							mike

    Anyone watch it?
    
    what was said?

    re: .10
    
    I'll let you know in about 4.5 days, Andy.

    The think that gets to me is that the company sends comments to
    and makes announcements to the press and the stock analysts and
    doesn't talk to the employees. What are we chopped liver? Most of
    us are grown up people. We can handle bad news.

    The fact that nothing has appeared in LIVEWIRE or any other internal
    communication channel from official Digital shows to me a complete
    lack of respect for Digital employees by the leaders (including KO)
    of this company.

    ~Cliff

    Whoops. sorry...

    Something has been misunderstood here.  The requirement for Digital to
    disclose information that will have an impact on earnings to the public
    (via the Dow Jones News Service and interviews with Wall Street
    analysts) is twofold:
    
    (1) One is legal, and although I'm not a lawyer, the common
    understanding of this requirement is known to any business executive,
    which I am, it is: "You can't sit on bad news".  If a shareholder sues
    the officers and directors of a company because the value of a stock
    fell without warning, then the shareholder may press as a claim that
    the company witheld information.  If proven, courts have upheld such
    claims, and companies have agreed to settlements with shareholders to
    avoid litigation.
    
    (2) The other is a just common sense: with so many companies to watch,
    fund managers depend on a handful of Wall Street analysts who make it
    there job to judge the short- and long-term prospects of Digital and
    its competitors.  Losing credibility with these people is far worse
    than just giving them bad news.  After you've lost credibility, they
    won't believe anything they say.
    
    As for the "process" of informing employees, I believe that there still
    is a world-wide employee newsletter called "DECWORLD" that carries
    company news roughly 4 to 8 months after the fact.
    
    If I were the president of this company, I'd put out a videotaped
    message to employees, have it dubbed into local languages, and have it
    air-expressed to all offices with more than 5 employees.

    Since I posted my note back a few I took an other look in LIVEWIRE.
    There are two postings there related to the news media stories. One
    is about the 9000 problems and contains more information then I've
    seen in the press so far. Made me feel a little better.

    The other is about people issues. It's full of fluff and not as
    re-assuring. It is something though. I don't understand why it
    took so long to get to LIVEWIRE.

    There were still no comments about our financials. Surely there
    could have been something?

    ~Cliff

KO's appearance on Chronicle has been post-poned.  I think the
new date is March 5 

    I really doubt that Ken's Chronicle segment will reveal anything
    we haven't heard already.  
    
    Mark.

    RE .16 -- I received mail (unfortunately, I don't still have a copy) that
    originated in a PR group that said the Chronicle broadcast featuring
    Digital will be broadcast March 6 (not March 5).

    I believe the cable channel that also broadcasts Chronicle is A&E.  I
    don't know whether they show the same shows at the same time.  Check
    your local listings... :-)

						-- Nina

    RE: .-1
    
    The Chronicle broadcast on A&E is the same format but different content
    than the Chronicle that is syndicated for broadcast TV. 
    

    WELL.....how much longer are we going to be kept in suspense?  Did
    anyone watch KO on the chronicle show?  What did he say?  There are
    plenty of people in the field (like me) who could not watch the
    show and would like someone to post a transcript here.
    
    Thanks - Jill

Jill,

Read note 1018, starting at reply # 43.

Betty

    Betty,
    
    Thanks for the pointer to #1018.
    
    -Jill-