Conference 7.286::digital

2500.0. "Bob Palmer: USA Today 5/12" by NECSC::BIELSKI (Stan B.) Tue May 18 1993 21:20

         USA TODAY -- MAY 12, 1993 
         COVER STORY
         By John Schneidawind
         
         		DIGITAL ON CUTTING EDGE
         
         PICTURES BOB PALMER WITH THE FOLLOWING DATA:
         
         DEC'S CEO
         Name: Robert Palmer
         Title: President/CEO
         Age: 52
         Became CEO: Oct. 1
         Education: B.S. in Mathematics (1962)
         	    M.S. in Physics (1965)
         	    Texas Tech University
         
         DIGITAL LOGO
         	
         H.Q.: Maynard, MA
         Employees: 98,000 worldwide
         '92 Revenues: $13.9 billion
         1992 net loss per share: $22.39
         
         Features Graph titled "Digital stock climbing"
         Notes Tuesday close at $46.75
         
         COVER STORY
         
         CEO trims fat, designs strategy
         
         'Sometimes the decisions are painful, but I'm trying to
         save 90,000 jobs.
         	
         By John Schneidawind--
         New York --"Go Bob," nattily attired in a dark olive double-
         breasted suit, gold ring and watch, strolls quickly into 
         Digital Equipment's offices here, greets a visitor and test
         sips the coffee.
         	"It's not warm enough," Robert "GQ Bob" Palmer cajoles 
         a nervous Digital employee. "One thing I always insist upon 
         is that my coffee be hot." A new pot of hot coffee suddenly 
         appears.
         	Palmer, the new CEO at the USA's second-biggest 
         computer maker, knows how to get his way. Since taking the 
         helm at Digital on Oct. 1, Palmer has cut payroll, split the 
         company into separate divisions and hired a management team 
         comprised mostly of outsiders. Volla!

         	Experts say that after six quarters of red ink, 
         Digital will post a healthy profit in its fourth quarter, 
         ending late June. Since October, Digital stock has risen 20%. 
         It closed Tuesday at $46 3/4 up 7/8 - still a fraction of its 
         all-time high, $199 1/2, set in fall 1987.
         	Under founder and longtime President Ken Olsen, 
         Digital's staff was bloated. Revenue was slowly evaporating. 
         Customers were replacing Digital's midrange computers with 
         faster and cheaper personal computers from IBM, Apple and 
         Compaq.
         	Even worse, Digital was like a dinosaur stuck in a tar 
         pit. Employees found every conceivable way to avoid facing 
         facts. Digital's swamp-thick bureaucracy failed to act 
         swiftly and mercilessly.

         	Then Palmer arrived. Nicknamed GQ (as in Gentlemen's 
         Quarterly) because of his penchant for designer suits, 
         Palmer, 52, is  a fastidious dresser, a divorced father of 
         two and a workaholic who runs five or six times a week. 
         Palmer began to take a cleaver to one of the computer 
         industry's most entrenched corporate cultures.
         	Palmer says the days of waffling at Digital are over. 
         Clarity is the new buzzword.
         	"My own style is to be very direct, very clear," 
         Palmer said Tuesday in his first major interview since taking 
         charge. "Sometimes the decisions are painful, but I'm trying 
         to save 90,000 jobs."
         	Unlike Olsen, Palmer welcomes internal debate and 
         tolerates opposing views. But only to a point. Technology 
         chief Bill Strecker described Palmer's management style this 
         way: "This is not a consensus process- you either sign up for 
         the strategy or seek employment elsewhere."

         	So far, Palmer's premise is working. Digital is far 
         from being a healed company. But under Palmer, Digital has a 
         core strategy for the 1990's. Amoung its major points:
         	>Cost Control. Since 1991, Digital has cut its 
         worldwide workforce more than 25% to roughly 98,000 
         employees. Further payroll cuts may be necessary but nowhere 
         near that magnitude. In Digital's second quarter, expenses 
         grew at a slower pace than revenue - for the first time since 
         1988.
         	>Building a top-notch team, Digital last month landed 
         Ed Lucente, a 31-year veteran of IBM once rumored to be the 
         successor to former IBM CEO John Akers. Lucente joined 
         Digital as head of its worldwide marketing operation after
         a two-year stint at Northern Telecom. Palmer goes out of his 
         way to praise Adriana Stadecker, Digital's new vice president 
         of executive operations. Stadecker, 46, is one of the 
         highest-ranking women in the computer industry. Palmer also 
         recruited Enrico Pesatori, former head of PC maker Zenith 
         Data Systems, to take charge of Digital's burgeoning PC 
         business.
         	>Focus on superfast desktop computers. Palmer says the 
         Alpha computer chip will serve as the brains of most Digital 
         computers for 25 years. Based on the reduced-instruction-set
         -computing of RISC, technology, the Alpha chip makes 
         Digital's workstations the fastest in that $10 billion-a-year 
         market. Digital also will introduce a line of RISC-based PC's 
         this year. Those models are expected to be faster than PCs 
         powered by Intel chips, which dominate the industry.
         	But Digital won't abandon its Intel-based PCs. Within 
         the next week, it and other PC makers will announce a line of 
         PCs equipped with Intel's powerful Pentium chip.

         	Why has Palmer been able to accomplish so much so 
         fast? Limiting projects to small teams helps. Palmer says 
         most major decisions at Digital now are made by an executive 
         team of just 25 people. By contrast, the launching of the 
         Alpha chip - Palmer's own project - was staffed by a team of 
         100. Another plus: Digital's watchers say Palmer has the 
         proper blend of technology and marketing experience - and the 
         ability to shake things up.
         	Palmer came to Digital in 1965 but has never fit the 
         Digital mold. A native of the tiny peanut farming community 
         of Gorman, Texas, Palmer became high-school valedictorian 
         despite leaving his family at age 15 and supporting himself 
         through high school. After graduating from Texas Tech 
         University, Palmer joined chipmaker Texas Instruments, 
         leaving in 1969 to start his own chipmaking company, Mostek. 
         He sold Mostek to United Technologies in 1980 for $400 
         million, pocketing a small fortune.

         	Experts say that background gives Palmer an edge over 
         CEOs like Louis Gerstner of IBM, who previously worked at RJR 
         Nabisco and American Express. Palmer is the only CEO at a 
         major U.S. computer maker who knows the intricacies of 
         building microprocessors, a critically important field where 
         staying ahead requires doubling a chip's processing power 
         every 18 months.
         	"That's the last bastion of rough-and-tumble 
         capitalism, which means he's well-qualified for the computer 
         industry," says Chuck Casale, chairman of the Boston-based 
         Aberdeen Group, which tracks Digital.
         	Palmer also knows, from personal experience, how 
         Digital works--or doesn't. He led Digital's first effort to 
         cut costs, closing several factories in the late 1980's and 
         sometimes selling them off to employees. But he steered clear 
         of infighting.
         	"Somehow he never seemed to be caught up in the 
         internal politics of who was going to replace Ken Olsen," 
         Casale says. "His name wasn't ever rumored -- he was just 
         (picked by Olsen in July) out of the blue."
         	The secret of Palmer's success, industry analysts say, 
         is his ability to move Digital closer to customers and make 
         quick but reasoned decisions.
         	"He's really trying to turn around the culture of the 
         company, and that means restructuring it in terms of 
         customers," says Robert Herwick, a computer analyst at 
         Hambrecht & Quist. "The (Digital manager) who sells computers 
         to department stores (Francis Arnone, former CEO of 
         Marshall's department stores) comes out of the retail sector, 
         for example."

         	Yet for all the changes Palmer has brought to Digital, 
         he still faces an intractable problem: how to make the 
         business grow. In an age of commodity PCs that keep robbing 
         Digital and IBM of its core customers, "the business model 
         has radically changed, "Palmer says. "The introduction of 
         microcomputer chips has totally changed the paradigm that 
         companies like IBM and Digital had been so successful 
         operating within."
         	Palmer says there's only so much he can do. Revenue 
         will be flat in fiscal 1993, and he won't say what business 
         will be like in 1994."In order to be sustainably profitable, 
         we have to grow the revenue and this is going to be extremely 
         difficult, "he says.
         	But he seems dispassionately intrigued by the fix 
         Digital is in, much like an engineer trying to solve a 
         puzzle. "It's a fascinating problem and extremely 
         challenging. There's just an incredible number of things to 
         do."