Conference 7.286::digital

    Please forgive my ignorance, but does this effectively mean that we
    lost roughly $950M in the 4th quarter (when you take into account the
    restructuring charge)?

    RE .-1
    
    EXACTLY!

    It's a loss in the sense that it's cash that Digital doesn't have to
    spend, the shareholders are poorer for it, etc.
    
    But on the bright side, it's not an operating loss.  It's a one-time
    charge to earnings: we don't pay for laying off an employee more than
    once.
    
    The distinction is important because the basic business was profitable.

    Um, aren't we seeing "one-time charges" about every quarter now?
    You know, seems to me we must have pretty clever management if we can 
    lose money every quarter and still keep Wall Street happy.  ;^)
    
    Steve

    
    ...just a question of simple mathmatics.  If we took a $ 400 Mil.
    dollar charge in the past and lost some 10,000 people in the process,
    does this mean the $ 1.1 Bil. dollar 4Q charge will cut another
    15,000 to 20,000 jobs from throughout the corporation?  If true,
    this ought to drive our company stock lower if preceived by investors
    as another attempt to "get in control" or drive our stock right thru
    the roof because investors will realize we are serious about being
    around in the future.  The worst (saying goodbye to friends or even
    worst, the company) is yet to come!

         Digital reports 17 percent revenue growth, improved operating 
              results and restructuring charge in fourth quarter 

 Digital today announced earnings for its fourth quarter and full fiscal year 
 ending June 29, 1991, and for the second consecutive quarter, posted improved 
 operating results over the comparable periods of a year ago.

 Total operating revenues for the quarter were $3,944,859,000 up 17 percent 
 from the $3,365,275,000 of a year ago.  For the full fiscal year, total 
 operating revenues were $13,911,004,000, up 7 percent from $12,942,523,000 
 last year.  

 For the quarter, the company reported earnings per share of $1.10, up 62 
 percent from a year ago, prior to restructuring charges of $1.1 billion or 
 $8.18 per share.  The periods covered by these charges include the fourth 
 quarter of fiscal year 1991, and will be initiated throughout the current 
 fiscal year.  The cost savings benefits from these actions will increase 
 progressively quarter by quarter.  

 "From the start, we have seen improvements in efficiency grow faster than any 
 other industry has ever seen, and it has been exciting," noted President 
 Ken Olsen.  "However, for the most recent period of slowdown, the 
 improvements have accelerated, particularly in the area of semiconductors.  
 Even though we have had positive revenue growth through this time, it has not 
 been large enough to absorb the resulting extra people and space.  It always 
 hurts to downsize, but that is the cost of improvement and efficiency from 
 design to manufacture, to marketing, selling, and servicing.
    
 "We are encouraged by this quarter's operating results.  The company 
 continues to be profitable from current operations and, while pleased with 
 the progress shown this quarter, we are not satisfied.  We remain focused on 
 our goals of improved profitability and enhanced shareholder value.  Our 
 balance sheet remains strong giving us the strength and flexibility to make 
 the changes necessary to increase market share and take advantage of any 
 upturn in worldwide economies that may occur." 

    				   FOURTH QUARTER ENDED:

    				JUNE 29,1991	  JUNE 30, 1990


PRODUCT SALES	              $2,343,195,000      $2,064,687,000
SERVICE & OTHER REVENUES       1,601,664,000       1,300,588,000
TOTAL OPERATING REVENUES       3,944,859,000       3,365,275,000
COST OF PRODUCT SALES          1,113,891,000       1,034,784,000
SERVICE EXPENSE	                 910,255,000         784,031,000
TOTAL COST OF SALES            2,024,146,000       1,818,815,000
RESEARCH & ENGINEERING           445,572,000         413,356,000
SELLING
 GENERAL & ADMINISTRATIVE      1,281,016,000       1,056,700,000
RESTRUCTURING CHARGE           1,100,000,000         400,000,000  
NET INTEREST (INCOME)/EXPENSE    (16,091,000)        (30,106,000)
INCOME BEFORE INCOME TAXES      (889,784,000)  	    (293,490,000)
INCOME TAXES                     (18,466,000)        (36,764,000)
NET INCOME	                (871,318,000)       (256,726,000)
AVERAGE NUMBER OF SHARES
 OUTSTANDING                     122,986,814         121,780,226
NET INCOME PER SHARE             $     (7.08)        $     (2.11)
NET INCOME PER SHARE BEFORE
 RESTRUCTURING                   $      1.10         $       .68


           OPERATING RESULTS FOR THE TWELVE MONTHS ENDED:

    				JUNE 29, 1991	  JUNE 30, 1990

PRODUCT SALES	               $8,298,515,000     $8,145,491,000
SERVICE & OTHER REVENUES        5,612,489,000      4,797,032,000
TOTAL OPERATING REVENUES       13,911,004,000     12,942,523,000
COST OF PRODUCT SALES           3,905,355,000      3,825,897,000
SERVICE EXPENSE	                3,373,025,000      2,968,529,000
TOTAL COST OF SALES             7,278,380,000      6,794,426,000
RESEARCH & ENGINEERING          1,649,380,000      1,614,423,000
SELLING
 GENERAL & ADMINISTRATIVE       4,471,629,000      3,971,059,000
RESTRUCTURING CHARGE            1,100,000,000        550,000,000
NET INTEREST (INCOME)/EXPENSE     (68,665,000) 	    (111,374,000)
INCOME BEFORE INCOME TAXES       (519,720,000)       123,989,000
INCOME TAXES	                   97,707,000         49,596,000
NET INCOME	                 (617,427,000)        74,393,000
AVERAGE NUMBER OF SHARES           
 OUTSTANDING	                  121,557,705        125,221,526
NET INCOME PER SHARE              $     (5.08)       $       .59
NET INCOME PER SHARE BEFORE
 RESTRUCTURING			  $      3.17        $      4.19


                             Q4 - FY91

PRODUCT SALES...................................   $2,343,195,000
SERVICE AND OTHER REVENUES......................    1,601,664,000
TOTAL OPERATING REVENUES........................    3,944,859,000 
COST OF PRODUCT SALES...........................    1,113,891,000
SERVICE EXPENSE.................................      910,255,000
TOTAL COST OF SALES.............................    2,024,146,000
                                GROSS MARGIN....            48.7%             
RESEARCH & ENGINEERING..........................      445,572,000
SG&A (SELLING, GENERAL & ADMINISTRATIVE)........    1,281,016,000
RESTRUCTURING CHARGE............................    1,100,000,000
OPERATING INCOME................................     (905,875,000)    
                            OPERATING MARGIN....             -23%
INTEREST INCOME.................................      (26,188,000)
INTEREST EXPENSE................................       10,097,000
INCOME BEFORE INCOME TAXES......................     (889,784,000)     
                                PRE-TAX MARGIN..           -22.6%
TAXES (TOTAL FEDERAL, STATE & FOREIGN)..........      (18,466,000)
                       EFFECTIVE TAX RATE.......             2.1%
NET INCOME......................................     (871,318,000)
EPS.............................................            (7.08)
AVERAGE SHARES OUTSTANDING......................      122,986,814

                BALANCE SHEET/CASH FLOWS - Q4 FY91

CASH & CASH INVESTMENTS.........................   $1,924,050,000
ACCOUNTS RECEIVABLE (NET).......................    3,316,677,000
(RE:  A.R. DAYS SALES OUTSTANDING)..............       76    days
INVENTORIES:   RAW MATERIALS........ 360,367,000
               WORK IN PROCESS...... 501,394,000
               FINISHED GOODS....... 733,389,000
                        TOTAL INVENTORIES          $1,595,150,000
PREPAID EXPENSES................................      395,478,000 
DEFERRED INCOME TAX CHARGES, NET................      576,476,000
TOTAL CURRENT ASSETS............................    7,807,831,000
NET PROPERTY, PLANT & EQUIPMENT.................    3,777,830,000
TOTAL ASSETS....................................   12,028,494,000
SHORT TERM DEBT PLUS CURRENT PORTION OF LTD.....       23,344,000
TOTAL CURRENT LIABILITIES.......................    4,209,641,000
DEFERRED TAX CREDITS NET........................       45,010,000
LONG TERM DEBT..................................      150,004,000
TOTAL LIABILITIES...............................    4,404,655,000
STOCKHOLDER'S EQUITY............................    7,623,839,000     
BOOK VALUE PER SHARE............................         $  61.18 
CAPITAL SPENDING (ADDITION TO PP&E) - QTR.......      191,590,000
CAPITAL SPENDING (ADDITION TO PP&E) - YEAR......      737,548,000
DEPRECIATION & AMORTIZATION ....... - QTR.......      226,930,000
DEPRECIATION & AMORTIZATION ....... - YEAR......      828,560,000
NON U.S. REVENUES ................. - QTR.......    2,494,756,000
                                                 or           63%       
NON U.S. REVENUES ................. - YEAR......    8,379,935,000
                                                 or           60%
TOTAL EMPLOYEE POPULATION APPROXIMATELY.........          121,000 
    

    
    
      Perhapse some of this money is going to be used to finance
    the Phillips acquisition?  (Rumoured to be around $300m.)
    
    
    						-al
    

    
    
    
      I just saw the actual financials posted in -.2
    
      I don't know much about finance,  but why are "costs of everything"
    up over last year in the midst of all this cost cutting? 
    
      All the improvement in earnings seems to come from improved 
    revenues, rather than the impact of any cost cutting measures.
    
      why?
    
    

    Does anybody know what can legally be included in a "restructuring
    charge"?
    would acquisitions qualify under that charge?
    
    Franc.

    According to the Wall Street Rag, the Phillips things came out of our
    cash reserves....besides, that is an FY92 expense.
    
    While I'm glad to see revenues picking up so healthily, that 1.1B
    restructuring charge scares the Bejaysus out of me.  I agree strongly
    with .8, that we're looking at 20,000 more lay-offs in FY92, perhaps
    even more if the package content has been reduced as I believe is the
    case.  We ain't seen nuthin yet.
    
    It's also clear that the pain will be stretched out across the quarters
    of FY92.  Wouldn't it be far more humane to do the dirty deed right
    now, and then get down to business.
    
    The most devastating sentence in the entire Financial Statement is:
    
           "THE COST SAVINGS BENEFITS FROM THESE ACTIONS WILL
           INCREASE PROGRESSIVELY QUARTER BY QUARTER."
    
                     Translation????
    
            "THE RATE OF LAYOFFS WILL INCREASE PROGRESSIVELY
            QUARTER BY QUARTER."
    
    Two years ago, I was in a meeting with a VP who talked about Digital
    needing only 80,000 employees.  Guess he knew what he was talking
    about.  I figure we'll be at that level by mid FY93.

    if at $50 per hour 
    you layoff 20,000 people 
    and they get a mean of 15 weeks pay 
    
    total 600,000,000 
    that's less than 1.1B
    and no one gets $50 per hour
    
    so please explain how you figure 20,000 layoffs
    
    
    buzz

    I think your mean of 15 weeks pay is very low.
    
    I had calculated my own under TSF03 metrics at almost exactly 100K.
    The 1.1 billion would pay for 11,000 of me.  Given that I have almost
    20 years service, and make a pretty decent salary, I'm figuring that
    that the average poor slob would get about 50-60K.  That pushes the
    total that could be laid off pretty close to 20K.  Also, lots of
    manufacturing folk probably are in the 20-30K range so the numbers
    could get real interesting.
    
    That money also has to cover things like the "Engineers into Education"
    Program (I think).
    
    For the life of me, I can't understand why they won't sweeten the kitty
    with some aggressive early retirement incentives like HP just
    announced.  They are offering one year's pay...plus normal retirement.
    I'd take that so fast it would make their eyeballs click.
    
                                                             

Restructuring charges probably include the cost of plant closings and
consolidation.  The cost of severance is greater than N weeks' salary --
the most obvious additional cost is the continuing insurance coverage.

    True, True......but I wouldn't think the insurance thing would be
    a big bite.  Just the same the radio announcement today that DEC
    will lay off 2,000 in August sorta validates my 20,000+ number.
    
    Guess we'll all hafta wait and see.

    Dick,
    
    At an INSEAD Advanced Business Course earlier this year, top managers
    from our customers told us we were 30,000 people too fat to survive.
    
    Your 20,000 figure worldwide, on top on those who have already
    departed, has some credence (although I'm guessing slightly lower).
    
    :-(
    
    John
    

    
    As a gross rule of thumb, it is common to figure the cost of an
    individual as double their hourly rate.  Therefore, using $50/hour may
    not be too far off.  Then you would add in the addtional savings of
    T&E not incurred.  I still don't know if it will add up to 1.1B, but
    accountants have to account for it all for Uncle Sam.  Also, this is
    generally a set aside.  It may not use all of that, but it will most
    likely cover the actual.
    
    15 weeks might be a little light.  As I saw the breakout of the
    package, the lowest you could recieve was 12 weeks, all the way up to,
    I believe, 77 weeks.  Add accumulated vacation time on, and the average
    amount of pay-out can be significantly more than 15 weeks.  My boss got
    an even 52 weeks.
    
    tgc

    I won't debate the notion of significant reductions in the employee
    population, however to try to carve up the $1.1B by assuming it is all
    people and people related transition expense would probably be a
    mistake.
    
    A number of mfg facilities and various office buildings have been
    targeted over the past months as excess. The cost of closing facilities
    can be enormous. For example a 300,000 sq ft operation (which is not
    all that large) could have an base of assets in excess of $100M.
    Therefore to close that operation, write off the assets and
    inventories, pay for site clean up, etc could cost you in excess of
    $125M easy. Suffice to say there are probably a couple of these buried
    in the restructuring reserve.
    
    For the note that inquired....Phillips, from an accounting standpoint,
    could not be included in the restructuring charge. Generally these
    charges are for the cost of discontinued operations. Acquistions are
    funded from cash or retained earnings.
    
    Digital is the midst of some major pain. Good luck to all.
    
    

    Regarding the debate over what the $1.1B covers. Would the 10K have
    more details than the earnings report?
    
    Dave

    On revenue increase:
    
    While IBM reported an 11% drop in revenues, DEC announces a 17%
    increase. 
    
    Pretty good, one could think ... but:
    
    this includes the acquisition of Mannesman-Kienzle, which probably
    accounts for at least 5%, if not more.
    
    Would anyone know how much Kienzle contributed to "fresh" revenues?

It would be interesting to see how the "Non US revenues" broke down into
EUR and GIA figures. Or is noone interested in where the company made most
of its money last quarter? ;-)


	Craig

    I think Europe was close to flat with significant growth in GIA....
    don't recall where I heard this, but do know that there is a big
    push on to grow the business in the Pacific Rim.  I wouldn't be
    at all surprised to see 75% of our business off-shore within 3-4
    years.
    
    Meanwhile, I'm curious that we keep trying to apply a fix (successive
    waves of lay-offs), that hasn't appeared to work for anyone.  A
    recent WSJ article gave lots of good data implying that it just
    isn't a good solution.  We know how well it worked for Wang.  Same
    article says that AT&T, after getting rid of 100,000, still has the
    same systemic problems.  Oh Well........

    >> "From the start, we have seen improvements in efficiency grow faster
    >> than any  other industry has ever seen, and it has been exciting,"
    >> noted President  Ken Olsen.
    ...
    >> "It always hurts to downsize, but
    >> that is the cost of improvement and efficiency from  design to
    >> manufacture, to marketing, selling, and servicing."
    
    There's something in the tone of this that I find disturbing (and
    apparently some other folks do, too, upon doing a quick sanity check).
    Given the heapin' helpin' of human misery that's been dished out
    over the last year or so, I don't think it's particularly appropriate
    for anyone in upper management to be "excited".  And the second quote
    above has an air of callousness, indifference, and insensitivity that
    represents an abrupt departure from the traditional image, which I
    find alarming and forboding.
    
    They've become hardened to all this, up there.  It's been done once
    now, and they found that it didn't bother them all that much, so now
    it becomes much easier to do it again and again.
    
    On top of this, I'm stunned that a company that's in such trouble
    that it has to lay off tens of thousands of employees now sees fit
    to spend hundreds of millions buying other companies.  I don't care
    if it's "good business" (whatever that is), and I don't care how well
    Europe sales are going (as if you can isolate them... don't they sell
    hardware and software that was at least partially designed, made,
    or whatever in the U.S.?), it just doesn't "feel right" to me, after
    all of the layoffs, cutbacks, and other nightmares of the last year.
    Somehow it feels like a sneering slap in the face to those of us who
    are no longer here as well as to those of us still here but laboring
    under restricted conditions and a highly uncertain future.
    
    Chris

    re -1
    
    Ay-uh....It always amazes me how people still think KO
    is really heartbroken over this etc. 
    
    I remember when asked about layoffs a while back KO 
    said something like...it's not something I deal with at 
    my level or some such thing.  Also, when he said
    of you want a steady job go to work for the Post Office.
    
    boo hoo...loads of compassion.
    
    Mark

    
    re. last couple..
    
    
    	can it be that the image of KO that a lot of us had was in error
    all these years??

    I think the biggies basically only get "excited" if there is the
    possibility of the stock price rebounding.  How would you like
    to be sitting on thousands of shares while the price of boats
    and tuition keeps going up?  Must be rough.
    
    Looking over the Financial Statement, it would appear that the only
    profitable entity in the Corporation is "services", with margins
    approaching 40%.  Does anyone know of any other PCU that actually
    made any money in FY91?......or is the whole operation being
    subsidized by service revenues?

    Re .-1
    
    Mr. Lennard, I thought I was a bad enough cynic but you have me beat in
    spades. Your notes get tiresome to read after a while, they all say the
    same thing. Not in your words but this is how I read them:
    
    	- The management is piss poor
    	- I've lost all incentive to do anything useful for this company
    	- I wish they'd pay me to leave
    
    And in answer to your question. Yes other PBUs were profitable. Take a
    look at the NAC business or the ONS PBU in particular (I know the FY91
    figures for that one and it was very profitable).
    
    Dave

    Gosh, fella.....sorry you feel that way, but I really thought that
    I had a legitimate question.  The reason I asked is that I know of
    PBU's that have some pretty good numbers, UNTIL you back out the
    services revenue.
    
    

    re: .27 and others
    
    Forget KO.  The way I read it is that the engineers who ran this
    company (and still do to a larget extent) thought things were great as
    long as the changes brought on by technology affected our customers
    primarily.  It was damn easy to be a caring sharing company when you
    made money hand over fist.
    
    Now that changes wrought both by technology and the competition have come
    home to roost, it's a far different song being sung.  We can bitch and
    moan all we like about how it's not like it used to be - welcome to the
    real world.  A higher standard of performance is required, not a
    nostalgic return to a way of doing business which really only applied
    to a small but powerful sector of the company anyway.
    
    I recently saw a quote which I will paraphrase: Change gives some
    people imagination; to others, a headache.  Perhaps those who wish for
    the olden days should take two aspirin and call in sick in the
    morning...
    
    Al
    

I would like to re-make a point made in an earlier reply that seems to have
gotten lost in this topic.

We took a $400 million (or whatever it was) charge against earnings for
restructuring early in this fiscal year.  We laid a bunch of people off.
We instituted all these cost-cutting measures.

So how come all of the cost items on the bottom line are up, across the board?
When will these austerity programs have some bottom line effect?

--PSW

    We paid salaries to them for work during the quarter and then
    paid them for the package.  That's a lot of money to pay for
    people who, in the opinion of some, weren't contributing to the bottom line.
    
    I've thought about the anti-Digital: the company formed by the
    businesses, products, and employees cast off. 

RE: .33

But those monies came from the one-time charge against earnings, didn't they?
They aren't part of cost-of-sales, engineering expense, or general selling
and administrative costs.

--PSW

    I see your point: with headcount constant or declining, one would
    expect expenses associated with selling and administration to be
    constant or decline.

    re: -.1 Expense Reduction
    
    I guess Digital is learning to do accounting the tried-and-true
    political way, where the word "reduction" really means "reduction
    in the rate of increase".  It could take a few budgeting (and layoff)
    cycles to actually *cut* the current expense number.  I imagine that
    some of the money set aside is to buy us out of some of the recurring
    expense items like building rent, supply contracts, and suchlike.
    
    Geoffrey
    

Re .33:

>    We paid salaries to them for work during the quarter and then
>    paid them for the package.

BTW, did you ever imagine what would have happened if the field had laid off
hundreds of salesmen the week *before* the end of year rush?
				/AHM

>    I don't care
>    if it's "good business" (whatever that is), and I don't care how well
>    Europe sales are going (as if you can isolate them... don't they sell
>    hardware and software that was at least partially designed, made,
>    or whatever in the U.S.?), it just doesn't "feel right" to me,

	It doesn't feel right to me either - someone else who's forgotten that
	where the money has started to come in, and where it will continue to
	grow rapidly, is not products or software, but services.

	If we continue to focus on products and software we will be belly-up
	........................ fast!

	Heather

    Amen .38 ..... and it's happening as we speak.  We seem unable to pull
    ourselves out of a self-destructive ever-bigger-and-better-hardware
    hole.  We ain't making any money on software either.  A young fella
    named Dave Stone has been making the rounds with some slides showing
    that we are losing money on hardware, and making just a bit on SW.....
    until you back the services revenue out, and then we are losing there
    too.
    
    If you think I'm down on Digital management, you ought'a hear some of
    the remarks he makes.

    
    Services is not going to be the savior either.  We can make money out
    of services so long as our customer agree to be in a VAX/VMS
    environment where DEC has an undisputed monopoly and advantage.  But
    the world is going more and more into open systems.  Then the price of
    services becomes an open market too.  If I were a customer with open
    systems, I will not pay the rate that a DEC. IBM or others demand.  But
    I will shop and see who will give me the best rate.
    
    The painful fact is DEC has a VAX cost structure but an open system
    profit margin today.  The math does not work any more.  Head count
    reduction will be a fact of life.  People who want to stay to fight
    another day will have to learn to be competitive in a fast changing
    world technically.  Otherwise, death is round the corner for this phase
    of one's career.
    
    Sometimes, one might need to leave without the benefit of a TFSO.  For
    me, given my choice of lifestyle and location, this makes sense.  I had
    enjoyed working for DEC.  But the time has come to go.  And I sincerely
    wish DEC the best.
    
    - Phil
    

    The question is "What is our value added?"
    
    If we can offer a customer more value for his/her service dollar, and
    we can get the customer to believe that and act on it, we can win
    service business.  But we aren't going to win it based on the color of
    our cabs.  
    
    We have to demonstrate deeper knowledge of the customer's business and
    the applicable technologies than either the high priced or the low
    priced competition.
    
    As generalists, we won't compete successfully.  The standard view of a
    consultant is someone who comes in, asks a lot of questions, and then
    makes recommendations that you should have thought of yourself.  We
    have to show that we have already done our learning about the
    customer's business _before_ we start billing.  Our competitive edge
    must be in superior knowledge and understanding of both business and
    technical issues and the ability to communicate superbly.
    
    Those who are already close to customers' business have a leg up.  The
    rest of us have to get moving.
    
    Dick

I tossed the Q4 and full year numbers into a spreadsheet to see how things
changed from year to year.  I thought the results were rather interesting.

  FOURTH QUARTER ENDED:
                                 JUNE 29, 1991     JUNE 30, 1990        Change


  PRODUCT SALES                    $2,343,195,000    $2,064,687,000      13.49%
  SERVICE & OTHER REVENUES         $1,601,664,000    $1,300,588,000      23.15%
  TOTAL OPERATING REVENUES         $3,944,859,000    $3,365,275,000      17.22%
  COST OF PRODUCT SALES            $1,113,891,000    $1,034,784,000       7.64%
  SERVICE EXPENSE                    $910,255,000      $784,031,000      16.10%
  TOTAL COST OF SALES              $2,024,146,000    $1,818,815,000      11.29%
  RESEARCH & ENGINEERING             $445,572,000      $413,356,000       7.79%
  SELLING
   GENERAL & ADMINISTRATIVE        $1,281,016,000    $1,056,700,000      21.23%
  RESTRUCTURING CHARGE             $1,100,000,000      $400,000,000     175.00%
  NET INTEREST (INCOME)/EXPENSE      ($16,091,000)     ($30,106,000)    -46.55%
  INCOME BEFORE INCOME TAXES        ($889,784,000)    ($293,490,000)    203.17%
  INCOME TAXES                       ($18,466,000)     ($36,764,000)    -49.77%
  NET INCOME                        ($871,318,000)    ($256,726,000)    239.40%
  AVERAGE NUMBER OF SHARES
   OUTSTANDING                           122986814         121780226      0.99%
  NET INCOME PER SHARE                     ($7.08)           ($2.11)    235.55%
  NET INCOME PER SHARE BEFORE
   RESTRUCTURING                            $1.10             $0.68      61.76%


  OPERATING RESULTS FOR THE TWELVE MONTHS ENDED:
                                 JUNE 29, 1991     JUNE 30, 1990        Change

  PRODUCT SALES                    $8,298,515,000    $8,145,491,000       1.88%
  SERVICE & OTHER REVENUES         $5,612,489,000    $4,797,032,000      17.00%
  TOTAL OPERATING REVENUES        $13,911,004,000   $12,942,523,000       7.48%
  COST OF PRODUCT SALES            $3,905,355,000    $3,825,897,000       2.08%
  SERVICE EXPENSE                  $3,373,025,000    $2,968,529,000      13.63%
  TOTAL COST OF SALES              $7,278,380,000    $6,794,426,000       7.12%
  RESEARCH & ENGINEERING           $1,649,380,000    $1,614,423,000       2.17%
  SELLING
   GENERAL & ADMINISTRATIVE        $4,471,629,000    $3,971,059,000      12.61%
  RESTRUCTURING CHARGE             $1,100,000,000      $550,000,000     100.00%
  NET INTEREST (INCOME)/EXPENSE      ($68,665,000)    ($111,374,000)    -38.35%
  INCOME BEFORE INCOME TAXES        ($519,720,000)     $123,989,000    -519.17%
  INCOME TAXES                        $97,707,000       $49,596,000      97.01%
  NET INCOME                        ($617,427,000)      $74,393,000    -929.95%
  AVERAGE NUMBER OF SHARES
   OUTSTANDING                           121557705         125221526     -2.93%
  NET INCOME PER SHARE                     ($5.08)            $0.59    -961.02%
  NET INCOME PER SHARE BEFORE
   RESTRUCTURING                            $3.17             $4.19     -24.34%

    So, what services can we sell?
    
    What are the areas where we can make a buck?
    
    Anything in the news?
    
    I think we have to look  for that extra edge, that new and emerging
    market.
    
    Lets look at what are customers have to do.
    
    What is the governments direction, (set cynical-OFF)?
    
    Lets look at the real issues.
    
    			hy

    
    	Welllll.... Glad you asked says he with a grin.
    
    
    	Today's issue of the South China Morning Post (one of Hong Kong's
    two english language newspapers) on the front page of it's business 
    section has a headliner about Digital winning a $3,000,000 (US) contract 
    from Cathay Pacific (area's biggest airline).
    
    	This is a service contract to service terminals worldwide that are
    NOT made by Digital.
    
    	According to the Cathay spokeperson, the award was based upon price
    with DEC beating out the previous contract company.
    
    	Cathay's DP shop is non DEC.

    About 95% of Digital's service revenues is derived from our HPS and SPS on
    Digital accounts.  But that market segment is only about 5% of the
    TOTAL services market.  In Europe, the total services market was about 40
    billion $ last year, and the market studies predict this to triple
    by the year 2000.
    
    It's clear to me where this company ought to look for more services 
    revenues.

	We can sell consulting services - Data Analysis, Organisational 
	development, process analysis...........pure services which we can get
	megabucks for, not a piece of equipment or software in sight, 

	Then, when they realise we are a quality company, and really do 
	understand their business, they are ready to buy our experience in the
	technology space.

	People do business with people.

	Heather

    Re. 24 and other notes on grwoth areas
    
    Although I don't have official numbers, the geographic split in
    revenues is something like:
    
    	US:  37%
    	EUR: 43%
    	GIA: 20%
    
    It is true that GIA revenues grew much faster then Europe.
    
    As for Europe, there are large disparities between "large" countries
    (UK was down 7% and France about flat), "medium-size" countries (for
    example, Switzerland and Spain had double-digit growth), and "small"
    countries which grow at rates over 20%.
    
    As for the claim made in .24 that 75% of overseas revenues would come
    for Pac Rim in 3-4 years, it might be streching it a little!
    
    One specific example in the telecom industry: if current trends
    continue, GIA telecom business will be larger than US telecom business
    in FY94.
    

    As our systems business continues to decline during the current
    recession there will consequently, in 1 year's time, be fewer systems
    converting from warranty to contract. This could seriously impact HPS
    service revenues in the next few years. We need to expand our service
    offerrings from purely hw/sw remedial into value-added and consultancy
    services. I thought this was the strategy behind the recent Digital
    Services restructuring ? Seems like the correct way to go, to me. Also
    as the previous noter says we should look at expanding market share of
    the total industry base. We seem to be moving away from that strategy
    by 'vendorising' hw/sw services that we don't want to be bothered with
    or are deemed 'low margin'. One of the reasons for perceived low margin
    is the corporate overhead structure that burdens low-price services
    with large overhead. Maybe we need to sub-organise into product groups
    (dare I say Product Lines) to optimise the cost-structures for each
    area of business. We are moving somewhat in that direction through the
    concept of Entrepreneurs.
    
    By the way, I have absolutely no problem understanding or accepting our
    current situation. It is standard textbook organisational development
    theory. Possibly it is made worse by the current economic climate but
    the theory of large-organisation evolution is absolutely standard.
    Anyone wanting to persue this theory might want to read a book by 
    Valerie Stewart called, "Change - the challenge for management".
    ISBN 0-07-084599-9
    
    Ian
    

    The biggest obstacle to becoming a serious consulting service vendor
    that I see is the parochialism that we have.  Too many of us have spent
    our entire careers inside Digital and have really no idea about how the
    rest of the world does business.  Customers do not call in consultants
    based on the technology in their tool kits.  Consultants get good
    reputations by demonstrating fundamental knowledge of the customers'
    businesses and by being quick studies for problem solving.
    
    The subjects that Heather mentions are probably not the easiest sales. 
    The "soft technology" of data analysis, OD, etc, are not accepted by
    the business community at large as effective or are not perceived to go
    to the core of problems.
    
    My guess is we would do better to gather intelligence from our account
    managers about what challenges their customers are facing, sorting
    through that data to find the places where we can make quick wins, and
    acting quickly in these opportunistic areas.  But then, do I know what
    I'm talking about?  Naaah.
    
    Dick

>    The biggest obstacle to becoming a serious consulting service vendor
>    that I see is the parochialism that we have.  Too many of us have spent
>    our entire careers inside Digital and have really no idea about how the
>    rest of the world does business.  

	Is this really true? I can't think of many people I know who came
	here without going elsewhere first.
	I have worked in the electricity supply industry, local government,
	television and microwave manufacturing, and Bell Atlantic (during the 
	divestiture from AT+T) before coming to Digital.

	Even if people have, there are many diciplines internally, we have
	sales and marketing, finance, logistics and delivery, etc. etc. - we
	can use our own experiences in these areas.

>    Customers do not call in consultants
>    based on the technology in their tool kits.  Consultants get good
>    reputations by demonstrating fundamental knowledge of the customers'
>    businesses and by being quick studies for problem solving.

	Here here!
 
>    The subjects that Heather mentions are probably not the easiest sales. 
>    The "soft technology" of data analysis, OD, etc, are not accepted by
>    the business community at large as effective or are not perceived to go
>    to the core of problems.
    
 	I am not sure about this, I believe we are not good enough about 
	educating our account managers and sales people about these services, 
	and where they fit. Where we have, we have sold considerable amounts,
	with mega spinoffs.
	
	The "Which computing" magazine in the UK will have an article in it
	in either Sept or Oct about data analysys/management - which will
	focus on this - thanks to one of our consultants in Digital.

	We have to be better at getting to the general market.
	

>    My guess is we would do better to gather intelligence from our account
>    managers about what challenges their customers are facing, sorting
>    through that data to find the places where we can make quick wins, and
>    acting quickly in these opportunistic areas.  But then, do I know what
>    I'm talking about?  Naaah.
 
	Yes we should, but we should also educate them in the services that
	we can deliver, and how they could sell them, and other opportunites 
	that arise from this.

	We have good people, we aught to be better at selling the services
	they can offer......................just look at how Coopers and
	Lybrand sell services.

	Heather

    I certainly have to agree about the "parochialism" charge...at least
    in as much as I experienced it in '86.  I was a member of the
    ill-fated Target Sales Force.  This was a group of about two hundred
    people, a multi-million dollar budget, et-al, specifically targetted
    at the IBM 34/36 RPG market.  We were supposed to convert these folks
    over to MicroVAX II's.  
    
    After three weeks of intensive "training", we were sent out on our own
    to tilt at windmills, equipped with the full according-to-DEC scoop
    on the 34/36 world.  Of course, it turned out that virtually everything
    we were told about the IBM world was wrong, and most of the IBM folks
    to whom I talked must have been shocked our our (my) naivte (SP?) and
    general lack of knowledge about the world we were trying to sell into.
    
    Needless to say, the effort was a total cat-ass-trophy, and we came in
    at about 3% of budget for the year.
    
    ......Oh, I almost forgot....ALL THE MANAGERS, secretaries, various
    staff folk, and a few selected "team players", went off on a cruise
    for a week as the last official act of the Target Sales Force.
                                 

    re:40-43 
    
    When was the last time you payed for the phone co. to
    fix your phone? 
    
    Why would I as a customer have to keep paying every month
    for service. 
    
    
    buzz

  RE .53
  
>    When was the last time you payed for the phone co. to
>    fix your phone? 
 
	I don,t; I replace the phone if it breaks. But if I want it fixed, I 
have to pay for it (after warranty.)

	If the phone LINE breaks, or any other equipment owned by the phone 
company breaks, they have to pay to fix it. And if they take more than 24 hours,
I don't have to pay for the time my phone was out of order. But, I'm paying
them every month for the service. Their repair costs are included.

	   
 >   Why would I as a customer have to keep paying every month
 >   for service. 
    
  Because when the customer buys the equipment, it is only waranteed for a
certain amount of time. After that, they can get a service contract, or pay
per-call when it breaks.

Why, as a customer of an automobile manufacturer, do you pay to have your car 
fixeed? By this reasoning, the manufacturer should repair it free, forever.
(Or do you lease? But that has its own set of headaches, and computers can be
leased, too.)

    re: .53
    
    I'm not precisely sure what point your trying to make, but...
    
>    When was the last time you payed for the phone co. to
>    fix your phone? 
    
    I've never paid the phone company to fix "their" problem (outside of
    the normal monthly phone charges, that is).  However, (in the
    Mid-Atlantic US at least), if _my_ phone wire in _my_ residence
    experiences a problem, _I_ have to pay for it.
    
>    Why would I as a customer have to keep paying every month
>    for service. 
    
    Depends on the service you want.  You have to pay an extra monthly fee
    to have the phone company fix the wires in your house.  Otherwise, when
    something goes wrong, I have to fix it myself or pay through the nose
    to have it fixed.
    
    So, I pay for the service I want: either basic let-telco-fix-their-
    problems-and-I'll-fix-mine service, or the let-telco-fix-it-all
    service.
    
    In software, we have the more remedial types of service (like CSC-ask-
    a-question-and-get-an-answer service) and more complex types of service
    (like EIS-come-and-design-my-application service).
    
    So what's your point?
    
    -- Russ

    I've seen a number of notes in here that suggest one way out of our
    doldrums is to sell more services:  Expand offerings, do consulting,
    focus on high-margin business, go for the cream.  It sounds pretty 
    simple.  We aren't making money on hardware, so let's abandon it and 
    just sell services.  We'll make scads of money. 
    
    I don't think so.  I'll try to keep the reasons short.
    
    We don't have the expertise to be big-time consultants yet.
    We don't have the track records to ask for and win fat margins.
    Expanded services are only good if the customer wants to buy them.
    Just because we're losing money on hardware now is no reason to
    abandon manufacturing;  there are people out there making a killing
    manufacturing hardware.  We just need to do it *their way*.
     
    Now for the verbose explanations.	
    
    We've spent jillions hiring and developing the talent that engineers
    our hardware.  Rightly so, because it's been our stock-in-trade, and
    when we had the best, we made lots of money.  We *don't* have that
    depth in the services area, and we spend a *pittance* on training 
    people to be business and management consultants.  Anybody that says
    we have a good industry reputation and adequate references has never
    heard an Andersen pitch.  We have a *long* way to go in this area, and
    what we've got now is more than partly due to our reputation as a
    systems vendor (which is dwindling rapidly).
    
    Expanded service offerings are fine, as long as the customer sees a
    benefit in them and (get this) will buy them.  They can be the greatest
    things in the world, but if the customer doesn't need it or can't pay
    for it, then it's a worthless undertaking.  Case in point:  Extended
    warranties used to be the hot item, on everything from cars to CPU's.
    Hundreds of companies were started up just to sell and maintain these
    "warranties" (insurance policies, really) and the margins were almost
    criminal.  Buy a refrigerator, and for only $59.95 get a three-year
    extended warranty that covers anything but a compressor failure.  Of
    course, you'd already paid for the first year's warranty as part of
    the sale price of the refrigerator, and the chances of anything *but*
    the compressor failing in the first three years is less than that of
    a meteorite falling on you in the basement of Fort Knox, but hey, it's
    still peace of mind, right?
    
    Most people have gotten wise to this, and extended warranties are now
    on the decline, with many of those companies folding.  In fact, a lot
    of companies are getting out of the hardware service business because
    customers aren't willing to buy equipment that fails repeatedly and
    then paying someone else to come fix it.  Some of the big third-party
    service providers are hanging it up (e.g. XEROX) because customers are
    not willing to pay for service with inflated margins.  
    
    Finally, everyone is crying that DEC is losing money selling hardware,
    and that we should either do a better job of convincing customers that
    our hardware is worth higher prices for some reason, or that we should
    get out of the hardware business.  I think this is a total cop-out.
    There are guys over in Japan, Taiwan, and *in this country* that live
    in palaces and own yachts because they're making a killing on hardware.
    They are the best at what they do, and they get rewarded for it.
    
    If DEC is the best then it will succeed.  Hardware, software, services,
    or anything else, that doesn't matter.  Best does *not* mean the most
    complicated, or the highest margin, or the greatest reputation, or any
    other one thing.  If we are *one* of the best, then we will probably
    succeed.  If we aren't one of the best, then we will probably fail,
    and we deserve to fail.  So, are we going to be the best, or not?
    
    Geoff Unland 

    
>    We don't have the expertise to be big-time consultants yet.

	We have a lot of very good consultants, and we have been increasing our
	visability in this space. The expertise is here today, and is growing.

>    We don't have the track records to ask for and win fat margins.
 
	However, we do get the big margins on cunsultancy, when we have spent
	the time with the account managers to explain the services, and the
	importance of these to the business.

	We had a day with a very large customer recently, which covered 10 
	main areas, including consultancy.
	The 4 areas that they wanted to buy into were ALL consultancy.

>    Expanded services are only good if the customer wants to buy them.

	And when they know what we can deliver, they want to buy-in.

>    Just because we're losing money on hardware now is no reason to
>    abandon manufacturing;  there are people out there making a killing
>    manufacturing hardware.  We just need to do it *their way*.
 
	I have not said abandon manufacturing, I have said concentrate on what
	we are good at, and what our customers want - they don't want boxes!

>   We *don't* have that
>    depth in the services area, and we spend a *pittance* on training 
>    people to be business and management consultants.  Anybody that says
>    we have a good industry reputation and adequate references has never
>    heard an Andersen pitch.  We have a *long* way to go in this area, and
>    what we've got now is more than partly due to our reputation as a
>    systems vendor (which is dwindling rapidly).
 
	I disagree, maybe it's different in different countries, but we have
	management consultant service centres, we have industry orientated
	delivery, we have our own people that work in the finance organisations
	, A+L organisations..............we have it, and when we tell people
	about it, they want it.
	   
>    Expanded service offerings are fine, as long as the customer sees a
>    benefit in them and (get this) will buy them.  They can be the greatest
>    things in the world, but if the customer doesn't need it or can't pay
>    for it, then it's a worthless undertaking.  

	Well, they're buying and paying - just look at the increase in our
	service revenues.
	they are not keen on buying our boxes.


>    Case in point:  Extended
>    warranties used to be the hot item, on everything from cars to CPU's.
>    Hundreds of companies were started up just to sell and maintain these
>    "warranties" (insurance policies, really) and the margins were almost
>    criminal.  Buy a refrigerator, and for only $59.95 get a three-year
>    extended warranty that covers anything but a compressor failure.  Of
>    course, you'd already paid for the first year's warranty as part of
>    the sale price of the refrigerator, and the chances of anything *but*
>    the compressor failing in the first three years is less than that of
>    a meteorite falling on you in the basement of Fort Knox, but hey, it's
>    still peace of mind, right?
    
>    Most people have gotten wise to this, and extended warranties are now
>    on the decline, with many of those companies folding.  In fact, a lot
>    of companies are getting out of the hardware service business because
>    customers aren't willing to buy equipment that fails repeatedly and
>    then paying someone else to come fix it.  Some of the big third-party
>    service providers are hanging it up (e.g. XEROX) because customers are
>    not willing to pay for service with inflated margins.  
 
	Exactly, customers wanted boxes, and software, whole businesses
	were built on this, now, the customers are getting wise, and realise
	that they can get other boxes that are just as, or more reliable, with 
	3rd party maintenance. They are no longer tied to a manufacturer.
	What they need is help in understanding how to use technology to change
	the way they do business, to be more profitable etc.
	They are not concerned about the specific box or software.
	Talking boxes and software puts them off. Talking services switches them
	on.

	Heather.........a consultant in a service centre

    
    	re .57 (Heather)
    
    >Exactly, customers wanted boxes, and software, whole businesses
    >were built on this, now the customers are getting wise, and realise
    >that they can get other boxes that are just as, or more reliable with
    >3rd party maintenance. They are no longer tied to a manufacturer.
    >What they need is help in understanding how to use technology to
    >change they way they do business, to be more profitable, etc.
    >.....
    
    	Right on.
    
    	I can see at least two opportunities in that paragraph that you
    	wrote:
    
    	1. "One telephone number to call for all your hardware service".
    
    	2. QUALITY customer training on the use of the products that
    	   we're selling them.
    
    	Both are services. Both can be very profitable
    
    	John

    re: .57  and the divergence of views ...
    
    You may be quite right, and that our differing views have to with
    being in different countries.  All I know is that the EIS consulting
    program that I've been working on for the last two years was supposed
    to be an incredible money-maker for the company, but has in fact cost
    us money.  And that I've seen a troop of other consultants that have
    wandered through without much of a clue and no useful input.  And that
    the DCC's in this country have gone through an unmerciful slaughter
    in the headcount reductions.  Yes, revenue numbers on hardware and
    software services have kept rising, but mainly because of price hikes
    on our proprietary offerings.  And because we can't control expenses,
    our margins on services have been declining, although not as rapidly
    as the margins on hardware.
    
    I tend to rag on services because of a couple of trends in this
    country:  Computer dealers in this country have been going bankrupt
    right and left as customers are no longer willing to pay high markups
    for "services" that they consider to be just more bloated overhead.
    And the major computer manufacturers that have relied on "total 
    solution" tactics (like us, IBM, and HP) are losing money on it.
    Granted that we have used this tactic almost solely as a way to get
    customers to buy our proprietary hardware and software ...
    
    I guess the point I was trying to make about additional service
    offerings was that most customers have only so much money to spend,
    no matter how wide a variety of services you have to offer them.  If
    we can get them to spend a greater share of that money with us, and
    if we can avoid wasting the money that they give us, then we will be
    successful.  Otherwise, it's just another useless marketing exercize.
    
    Geoff
     

    Digital rode the growth of the industry.  The growth of the industry
    was fueled by increasing numbers of customers buying something that
    could be called a computer or associated goods and services.  The
    growth has stopped, not because customers are spending less, but
    because the number of customers isn't growing any more.
    
    We have an overhead structure that can only be supported by customers
    in the Fortune 1000.  Mom and Pop stores can't afford the
    infrastructure needed to buy "tools" and "kits".  They will only buy
    low-maintenance easy-installation applications, the necessary hardware
    to run them, and the kind of books they can get in B.Dalton.  They
    might read BYTE, but only out of frustration, not by choice.
    
    Our traditional markets have been saturated in h/w, have a pot-pourri
    of miscellaneous s/w, and need help integrating it all.  The growing
    market has been at the low end for the past 5 to 7 years and we're
    going to play catch up for a while.  But in that market, high priced
    consultants are not very successful either.
    
    Consulting comes in as many flavors as customers.  If we understand the
    market well, we can cash in.  But we may miss on some of the niches.
    
    Just one man's opinion,
    
    Dick

    The major danger is that "highly profitable" will somehow get
    translated into "rape the customer".  If we're going to go for top
    dollar, we need to be d*mned certain that we're delivery top quality
    and value.
    
    -dave

    re: .61
    
    Gee, Dave, does that mean we should stop sending out people to work
    with DEC software that they've never seen before?
    
    -- Russ

    Not only that, but:
    
    	Stop assuming that sending someone to a 1-week course makes him an
    	expert.
    
    	Stop assuming that someone who last used a product 3 years ago is
    	STILL an expert.
    
        Many of our products and tools are sufficiently complex that
        expertise can only be engendered through CONTINUOUS use.  We need to
        develop teams of experts and then bring the work to them (or, in
        the last resort, send them to the work).
    
    In short, we need to become the kind of organization we tell customers
    we already are.
    
    -dave

    RE: .62, .63
    
    This is just of symptom of having [some] managers who have little technical
    background (if any).  Have the time they just don't understand the
    ramifications of their decisions.  
    
    It's the ones who actually brag about being non-technical that irk me
    the most.

    ... you've got it all wrong. All you have to do is click your heels
    together three times and repeat over and over, "We're Best-in-Class.
    We're Best-in-Class. We're Best-in-Class."

    re .62-.65
    
     IMHO it is the employees responsibility to aquire and maintain the
    skill sets. Managers can provide input and direction. Why do I feel
    that the previous reply's imply that management should dictate what the
    employee does? You need it, get it!
    
    -Mike Z.

    re -.1;

    IMHO your response typifies the problem.  It's like having a sports
    team where you let each player decide what sport he wants to play! 
    This crap about "it is the employee's responsibility" leads to groups
    of prima donnas where you can't find more than 2 people with the skills
    needed for any significant development effort.  So you pass up
    lucrative projects and go do residencies.  Or else you bring in people
    from all over creation and let travel and lodging expenses eat up your
    profit.

    As a case in point, consider the number of people who were just
    informed (on their way out the door) that their skill sets weren't
    relevant to the local market.  I haven't heard anyone in this
    conference claim that they deserved to be canned because "it is the
    employees responsibility to acquire and maintain the skill sets".  If
    it isn't a first-line manager's responsibility to see that his people
    are guided to develop marketable skills, whose responsibility is it?

    It is in neither the employee's nor the company's interest to spend
    large bucks sending people to courses on products they won't use or to
    shift people between specializations so frequently that they never
    become more than minimally competent.

    Yes, in the end, the ultimate responsibility for growth and learning
    resides with the individual.  I can't MAKE you proficient.  On the
    other hand, we're running a business, not earning Boy Scout Merit
    Badges.  If you can't (or won't) attain proficiency in areas where I,
    as your manager, need it, the best I thing can do for both of us is to
    let you pursue your career somewhere else.

    -dave

	re .66

	I didn't see any smiley face at the end of your reply, so I'm assuming
	you'r being serious.

	My experience in the 5 years that I have been here at DEC in the PSS/EIS
	organization, during which time BTW I have seen 4 different managers 
	come and go, is that when you have billable work there is no time for
	for training. If you don't have billable work, then you cant be off at
	training because if something comes up, you have to be available for it.

	It's now Friday at 3 pm, I just lost a shot at going to a good training
	course, for a skill set that my manager thinks I should have to be 
	proficient for future work oppertunities, because I had to wait till
	the last minute to make sure I had nothing to do next week. I asked for 
	this training a week and a half ago when a posting came along that
	there were still seats available and at the time I had no work scheduled.

	I understand that given the current situation where busniess is hard to 
	come by, that a manager wants to have his people ready for whatever
	may come down the pike. But to say that you need the training, but you
 	can't take it untill we are ABSOLUTELY, POSITIVELY sure that nothing 
	could POSSIBLY come up during that week of training is a terrible way
	for us to do busniess.

	Planning and long-term goals have been more than just laid by the
	wayside, we're not even talking here about short-term goals. This is 
	minute by minute. 

	Now for a disclaimer. I'm not saying that I have never been given 
	training. I have. But it seems that it has been more by chance than 
	by plan. And before you say that you should bring these issues up with
	your manager, let me just say that these issues have been discussed.

	The bottom line is that everyone seems to be running scared and 
	doing whatever it takes just to keep their job. That may indeed be
	reality of today. But it certainly makes it nearly impossible to 
	implement the philosophy of "You need it, get it."

Just letting off some frustration,
	-John- 

    re: .66
    
    Yo Z-man!
    
    Your response may be reasonable in the following scenario:
    
    	Your manager walks up to you and says, "We need you to come up to
        speed in X weeks on product Y for customer Z.  Do what you need to
    	do to be up to speed by then."
    
    Luckily, I have experienced that scenario twice.  Unluckily, once the
    X number was way too small.
    
    It seems the more common scenario is:
    
    	Your manager walks up to you and says, "We need you to come up to
    	speed on product Y for customer Z.  You start work in X' days."
    
    where 1 < X' < 3 and the real spin up time necessary is best measured
    in weeks.  I've been through this scenario more than once.
    
    A common response to this is "well, we'll just set the customer's
    expectations so that they are aware that you are not an expert yet."
    This is all well and good in the short term, but we can NEVER be
    perceived as best-in-class until the practice STOPS!
    
    Back when I was a customer, I was APPALLED by the fact that our sales
    reps had to work for DAYS or WEEKS to get an "expert" (read: Sales
    Support or current equivalent) on site to help configure a solution for
    a possible sale.  I was even MORE appalled when said "expert" walked in
    COLD with absolutely no background about the customer matters at hand.
    
    In my experience, the prevailing sentiment for Digital EIS/PSS and
    Sales Support has been "don't waste time bringing people up to speed
    BEFORE they get to the customer, just lower customer expectations."
    
    This attitude can bring reasonable short-term results.  Unfortunately,
    we will NEVER achieve Best-in-Class results with such an attitude. 
    At least, not as long as there are competitors who walk on site with
    ANSWERS IN HAND (one Large Blue corporation comes to mind...)!
    
    -- Russ

	What every software specialist needs is time built-in for training
	right into their job plan.  X amount of weeks per year is devoted
	to training is considered part of the cost of maintaining a high
	level technical person.   

	At the CSC's we found time and again that groups that don't send 
	their people to training lose - the calls stack up, the MOD calls
	increase, and everybody is unhappy.   Within our own group 
	(Graphics and Applications Support), the amount of training people
	get is fairly high.  You work with your team leader (not necessarily,
	the manager) to get training on the areas your team leader (a 
	technical person, usually a consultant sw specialist) and you
	consider important for the business.  Of course, we consider 
	the amount of 'outage' that we are allowed at any given time -
	we can't have everybody out training and not attending the store.
	Guideline that we have is 25% scheduled out on a given day -	
	that includes training and vacations and gives us enough slack
	to cover illnesses and whatnot.

	What's the upshot of all of this?  Most people like it, the business
	doesn't stop when people go away and customer's are happy when they
	call in and actually find people who are knowledgeable on the product.
	
	For you - fight for inclusion of training in your job plan.

	My 2 cents...
	
	Rick Beldin
	Atlanta CSC

    Heather,
    
    Can you (or someone) locate an on-line version of the article (or an
    abstract) and send it to me (SWAM2::MCCARTHY_LA or Larry McCarthy @LAO)
    
    Thanks.
    
    [And now, back to the FY91 Q4 Earnings discussion ...]
    

Worldwide News							      LIVE WIRE

    Explaining the restructuring charge in Digital's FY91 year-end results

      Bruce Ryan, Corporate Controller, discusses the restructuring
      charge and Wall Street's reaction.  This item is an excerpt
      from an article that will appear in the next issue of MGMT MEMO.

 Digital's year-end financial results include a restructuring charge of 
 $1.1 billion or $8.18 per share.  Basically, this charge is for costs 
 associated with downsizing, facility consolidation and equipment writeoffs.
 A portion of these costs occurred in the fourth quarter of FY91, but most 
 will occur in FY92 and beyond.  The cost savings benefits from these actions 
 will increase progressively quarter by quarter. 

 Over the last two fiscal years, we have recognized restructuring costs 
 totaling $1.65 billion.  These restructuring actions must be taken in order 
 to remain competitive in our changing environment.  The important thing is 
 that we have made the decision and now must complete the actions as quickly 
 as possible.  Future cost savings expected from restructuring will help future 
 earnings.

 In FY90, Digital had restructuring charges of $550 million.  The majority of 
 that money was spent on the people-related costs of downsizing.  We did, 
 however, at the same time reduce our facilities by about 4 million square 
 feet.

 The FY91 restructuring charge -- $1.1 billion -- is currently planned to be 
 split about evenly between people-related and other expenses (including 
 facilities and equipment).  That includes writing off equipment that is no 
 longer useful because of excess capacity and technology change (obsolescence).

 When we started this effort, we set targets for ourselves to get our whole 
 structure to be world-class competitive.  We're not just trimming.  We're 
 making what we have better than it was before. 

 Part of the facility expense is for leases on buildings that we are closing 
 as we consolidate operations.  For instance, when we consolidate several 
 leased buildings into one building (as we did with the new Powdermill Road 
 facility, MSO2, in Maynard, Mass.), the leases in the buildings we are 
 leaving may have a year or two to run and we may not be able to sublet them.  
 In other words, while we do see immediate savings from the consolidation, we 
 have to write off the cost of the leases for the unoccupied buildings, as 
 well as other expenses that continue after we move out--such as property 
 taxes, electricity and maintenance.  Those costs can all be written off at 
 the time of restructuring.

 With this restructuring charge, the company takes all these one-time costs 
 associated with a major change in the business and expenses them at one 
 time.  This way we get them behind us.  We get them out of our cost 
 structure.  Then future operating financial results will reflect just our 
 day-to-day operations and not costs that we are carrying as a result of 
 restructuring the corporation for world-class competitive operation.  We can 
 write that activity off today and then go forward.

    SO is this a gurantee, that we won't see any more restructuring costs.
    
    Peter Q (Who thinks that we could have made a whole heap of
    Profit/Revenue by using 1.65 Billion dollars invested in products and
    services, Write offs are a zero return investment...)
    
    q
    

    	Peter, you missed the point.  If we took the 1.65B and invested
    	it in product/service stuff, we would still have to carry the
    	overhead that the write-off allowed us to divest.  For instance,
    	we would still be carrying the excess 10,000 employees that the
    	write-off allowed us to let go.  We would still be paying the
    	rent on leased buildings to house those extra employees.  etc.
    
    	I'm sure the decision-makers looked at increasing our market
    	scope or whatever the investment of 1.65B would have allowed
    	us to do.  It is clear what they decided looking at current events.
    
    	Joe Oppelt

    Re .-1
    
    Also the restructuring charge is to recognize things on the balance
    sheet that aren't worth as much as they are carried for. Not all of the
    1.65B will go out as cash, some of it will be taken as writeoffs.
    You can't invest writeoffs in new product development.
    
    Dave

    But then, if we invested in something that was going to make some
    money... Several Months ago, I suggested to a few people around the
    place that we buy Wang. I estimated that it would cost us on the order
    of $200M to take control. We keep their CS organization running, we get
    their engineers working on migration products, we throw their sales
    force in with ours and keep those that succeed, and best of all, we
    have picked up a customer base, worth a few billion at least. 
    
    I over estimated. IBM basically has done the same, and it only cost
    them $100M. 
    
    We are one of the big players in this game. In hard times, we have the
    resource to take advantage of the smaller players, (if not even buy
    them in toto.) No, instead we are acting like a Mom and Pop, Central
    Mass board fabrication shop, that doesn't think it will survive.
    
    q