Conference 7.286::digital

re Note 3255.0 by TPSYS::LAING:

>     Any comments from those present at the taping for this
>     DVN?
  
        Palmer emphasized that our balance sheet was one of the best
        in the business and one of the best in the Fortune 100.  (One
        possible translation: we could continue to lose money like
        this for years without going out of business.)

        Palmer presented one result from the employee survey, which
        came across (to me and others with me) as saying that
        employees would like to be able to work harder.

        The Advanced Technology Group was described as one whose job
        was to develop technologies to be transferred to the other
        divisions.  (My observation on this is that technology
        transfer, which was almost always unsatisfactory between CRA,
        advanced development, and the product development parts of
        the one engineering organization, would be at least as
        difficult in this setup.)

        One of the questions from the audience was whether Internet
        access was going to be extended to all employees.  Palmer's
        response indicated that he wanted to avoid non-business
        access to the Internet (at least during business hours). 
        (It's not clear how this could be done, other than simply
        issuing a statement of policy.)

        Palmer showed his greatest displeasure for the sales people
        who gave excessive allowances in Q3 -- he said that they
        would be let go.  (He described them as if they had directly
        led to the loss of jobs.)

        (I don't want to steal all the thunder -- I'm sure a
        transcript will be available soon.)

        Bob

        I couldn't resist one more thing:  time and time again Palmer
        said that this re-org was the end of Matrix Management and
        that Matrix Management was responsible for much of our recent
        problems.

        Bob

>    Palmer showed his greatest displeasure for the sales people
>    who gave excessive allowances in Q3 -- he said that they
    
    	what are 'excessive allowances' - I've never heard the term before. 
    does it have something to do with too much discounts or something?

    Buy two PC's and get a free AXP?
    
    Get 'em while they last!!
    

    Re 
           <<< Note 3255.4 by KDX200::COOPER "Revolution calling!" >>>

   > Buy two PC's and get a free AXP?
    
   > Get 'em while they last!!
    
    No, no NO!
    
    	Buy two PCs and get a free VP.

RE: .3 (what are excessive allowances?)

Allowances are discounts above and beyond the discounts built into the system.
For example, a volume discount (buy Ethernet cards in 10-packs instead of
singly and get 5% discount from the single unit price), or a Digital Business
Agreement (aka DBA) which most large customers based on their volume of
purchases over the last few years.

So for example, my customer wants to buy a widget for $1000.  He has a DBA
which says he gets 6% off, so his cost is $940.  But if he buys 10 of them
at once, he gets an additional 5% off, so total cost is $8900 for 10 units.

But let's say that IBM comes in and offers my customer a similar widget for
$850 (or 10 for $8500).  The Digital Sales Rep might decide to ask for an
allowance of $500, bringing our price down to $8400 for 10 units.  There are
business people in each District who know the costs and profitability of 
each widget (and this information is *very* tightly controlled) who decide
if the allowance is acceptable.  If it is, then the Sales Rep goes back to
the customer with a new price of $8400, and we hopefully make the sale.

This negotiating process (finding out the amount the customer will pay for 
our widget, finding out what the competition is charging for their widget, 
figuring out all of the discounts built into the system which we can take 
advantage of (such as last quarters Software Upgrade Program), and then 
talking with the business people in the district to get an allowance which 
will make the sale) is a very large part of what a Sales Rep does for each 
sale.  I have nothing but respect for their work in this area.

-- Ken Moreau

    RE: .2  by LGP30::FLEISCHER 
    
        >I couldn't resist one more thing:  time and time again Palmer
        >said that this re-org was the end of Matrix Management and
        >that Matrix Management was responsible for much of our recent
        >problems.
    
    When you've been whipped by Donna Matrix, you know you've been beaten.
    

    doesn't she have a sister named Dot!????  ;^)
    
    
    
    parrot trooper!

The problem is that our sales people are not goaled on the PROFIT of the deal,
just the REVENUE.

So under this system, if it costs $100 to make a widget, and we sell it for
$90, the Sales Rep gets credit for $90.  Its an incentive to sell below cost.

An alternative, used by every other company in the business, is to pay the 
Sales Rep based on the profit margin.

Using this plan, the Sales Rep is given a list of widgets, their cost, and the
suggested selling price.   Sales Rep sells at whatever price s/he can get for 
the widget.  If its greater than the cost, the Sales Rep is paid a commission
on the PROFIT.  No incentive to sell below cost, since commission = 0.

This also causes products to be built at competitive prices, since if it can't
be sold for a profit, its quickly dropped from the Sales Reps bag of offerings.

And, it eliminates the game playing that goes on to set budgets, based on the 
well established GOBN (Good 'Ole Boy Network) that gives preferential budgets
to its members, and screws the rest.   Under a straight commission on profit
plan, budgets become meaningless.  The more you sell, the more you make.

I expect Digital will get serious about its commission plan soon... hopefully,
it won't be to late.

Bob

<<< Note 3255.9 by GNPIKE::SMITH "Peter H. Smith,297-6345,MR04-2 C3,Digital Consulting/FBE Toolkit" >>>

>Then we whip the
>    people who discount to avoid losing a sale?  We're goners...

	If you have to ship a hundred dollar bill with the order, you
	didn't really wnat the sale in the first place.

Jim

    re:10
    
    	Absolutely.
    
    	One of the biggest problems we have in Digital sales is not
    competing with H-P, IBM, or SUN, but with each other.
    	During this past year I have personally been on the "losing" end
    of several transactions that occurred because a Digital end-user rep
    gave an allowance (some in excess of any profit at all) to **win**
    the business from one of our VARs, who already had the business at
    their normal business practice discount.
    	This conflict between end user reps and channels is throughout
    the field and is fostered by managers who feel they must book the
    business direct, instead of taking a credit from a sale thru a
    reseller. It is the primary reason I am so disgusted, and frustrated,
    by our own sales models.
    	Sales people should be, must be, compensated on margin contribution
    and from $ one. Not revenue; and not you get compensation after you
    reach some artifical $$ number. Until we correct these problems, sales
    will continue to suffer and fail.
    
    		the Greyhawk

    Guess I'm gonna go to the DVN -- I agree with the noter who said
    metrics drive performance.
    
    Last FY was a Revenue driven year --  That does have a potential for
    disaster if the peddler dumps the deal.  A previous year, we did
    business on the basis of profitibility on each and every deal.  That is
    better for  behavior modification because the Sales person gets paid on
     gross margin.
    
    The S/R is given the choice of investing his/her money in the account
    for "strategic" reasons.  
    
    The gross margin focus also has drawbacks, but I believe they are
    easier to manage.
    
    The thing about allowances is that they don't happen in a vacuum. 
    There's at least 3 people involved in the allowance if it doesn't
    involve cross-functional organizations.  
    
    The reason for the allowances are discussed and if it makes good sense
    BASED on CURRENT Metrics, then the deal goes down.
    
    When we did the profitibility approach, we had stuff in there that made
    you want to puke --- BUT -- given that you didn't make the rules, you
    just swallowed often.
    
    I'd opt for the gross margin approach -- and if Palmer wants to ice
    some peddlers because of the allowance hits - let him -- they are just 
    the first of many anyway.
    
    my .021734685 (approximately)
    
    Dennis

    re .10
    
    Sales measurement based on margin was a key point in NMS (you don't
    remember the New Mgmt. System :-) ).  In fact the other key point was
    to have the business account based.  
    
    NMS seemed to be a great concept; if the product group did not make
    competitive products at a competitive price sales would sell something
    else including third party products.
    
    One of the unanticipated (or intended) consequencies was that sales did
    just that.  I clearly remember the mid year call to "do the right
    thing" and ignore metrics because we weren't selling enough product and
    had to cover our expense base.
    
    
    Peter Dillard

    RE: All revenue .vs margin based comp.
    
    Does anyone have a clue as to why sales is not measured on Margin?
    It's real clear this is a solution to the problem of selling
    ourselves out of business but I can't pull together the
    reasons/problems in doing so.
    
    The systems can't handle it answer I don't buy...Since
    Our systems can't handle the current compensation system anyway.
    I can't beleive this is not seen as a fixable problem.
    
    Reps are smart (did i really say that?).. Give them the game rules
    and they figure out how to win.  Simply change the gamerules and they
    will work on winning under the new rules.  This time they help Digital
    as well.
    
    I am sure Digital spent much more Sales Comp dollars than was planned.
    Especially in light of us loosing money!!!
    
    Almost done trying to figure this one out,
    
    Marty

.1>       One of the questions from the audience was whether Internet
.1>       access was going to be extended to all employees.

Lemme guess, Bob, you asked that question, right? :-)

Just curious: all Digital employees (with VMS or UNIX accounts)
currently have access to Internet mail and newsgroups (maybe even ftp,
for all I know). Was the question intended to mean when would all
systems run IP, and thereby provide direct access to the Web?

    re .6 - What are allowances?
    
    In addition to allowances made to directly win cost-critical business,
    there are at least two others forms or allowance:
    
    1)	Marketing allowances: buy two, get one free.  This obviously makes
    sense if it creates sales that would otherwise not have happened.  BUT
    if the customer was going to buy three anyhow, but gets them for the
    price of two, this allowance hurts our profit margin.
    
    2) Foulup allowances:  where due to a DIGITAL ERROR, we have to give
    stuff away, this is an allowance.  If we cannot deliver the correct
    stuff at the correct time, or the order is missing a small but critical
    component (disk controller, tape drive, memory, licences), we end up
    GIVING IT AWAY as a customer satisfaction issue.
    
    Not all allowances are due to 'irresponsible sales' simply 'giving away
    the farm'.   [Not my words - please imagine a sarcastic tone]
    
    Regardless of the source or reason for the allowance, sales are being 
    beaten up for permitting them.
    
    Also, when the ritual floggings take place for 'excessive allowances',
    I see no breakdown into type of allowance.  Thus, our difficulty in
    correctly delivering an order appears as a sales problem.  Cute, eh?
    
    Martin [Not sales - just a sympathiser]

re.10:

If "The metrics drive the behavior" then 

>Using this plan, the Sales Rep is given a list of widgets, their cost, and the
>suggested selling price.   Sales Rep sells at whatever price s/he can get for 
>the widget.  If its greater than the cost, the Sales Rep is paid a commission
>on the PROFIT.  No incentive to sell below cost, since commission = 0.

will not work because it still allows for a sales rep. to heavily discount
part of the sale in order to sell another product. The commission should be
paid on the margin of the total sale (or better still across all sales 
within a reporting period) and not individual products.

Dave.

    Re.5
    
    	>>> Get a free VP
    
    	Shouldn't that read "get a free DEC 154VP?"
    
    				Malcolm.

   Re: .15

>>    Does anyone have a clue as to why sales is not measured on Margin?
  
As Peter pointed out, the NMS was an attempt to begin the process to do just 
that.  However, we quickly found out that, with the current systems in place, we
really have no way to accurately measure margin on any given product, much less
on an entire sale.  We found out that many product groups were adding their own
"profit" to their specific cost component, and there was this enormous overhead
component added to the cost of each product.  The result was a meaningless
cost model on each product.

It's very easy for our distribitors and VARs to measure reps on profit.  They
know exactly what the pay DEC (and other vendors) for each and every product.
As long as they can accarately measure their internal costs, margin should
be a relatively no-brainer.

BTW, I worked for Unisys and we weren't measured on margin either, contrary to 
what a previous noter said about "every other vendor" measuring their reps that 
way.

Rev

    Re .10 & .18
    
    .10- Yes, totally agree. Sales does what sales is
    inspected/measured/incented to do. PLEASE change my metrics to measure
    and compensate me on profitability...as soon as I can be given accurate
    data on product margins. Under NMS, I had access to what was *supposed*
    to be costs w/overhead, and could quickly determine what I had to do to
    make a sale. In fact, I developed a little spreadsheet that worked very
    well. If you know you products, your competition, and most importantly
    *your customer*, under this type of approach the rest really does sort
    itself out...and quickly.
    
    .18 This type of approach has to measure all sales...not really sure
    how it could be otherwise. As mentioned above, under NMS, our account
    was certainly willing to have "loss leaders" (more like "close to
    breakeven" leaders) which would drive some VERY profitabel related
    sales. Kinda like Gillette selling razors at close to/below cost to get
    the blade sales, or Toys 'r Us practically *giving* away diapers to get
    people into the stores with their kids. It made a lot of sense, and
    still does.
    
    Steve

    Lets not forget the widely distributed February 1994 memo EMPHATICALLY
    telling sales not to lose on price. Then the  "disastrous" Q3 comes,
    and sales is blamed for excessive allowances?  Insane.
    
    The fundamental problem is that our beloved organization has lots of
    data and no information.  Inconsistent sales budgeting and compensation
    metrics are the way they are because Digital does not understand its costs.
    Period.  
    
    Excessive allowances?  Not from this sales dog.  Outrageous costs? 
    Yeah, you have a point.  Where in everybody's wonderful measurements
    are the costs of account management, customer service, paper-training a
    distributor rep, articulating Digitals strategy, keeping multi-platform
    application suppliers pitching Digital, etc., etc., reflected?
    
    We do not understand our costs.  Did Digital sell its gazillion PCs on
    the strength of a catalog?  Via a streamlined selling organization of
    X number PCBU specialists?  No way.  We sold them by end user reps
    priming the pump, positioning the product, explaining the strategy,
    utilizing distribution.  But no one acknowledges those costs.  They
    only count the revenue, and then have a big party because "the numbers"
    look good.    
    
    With all the exciting work we have done to develop a 21st century
    architecture, to lead in open client/server computing, to migrate a
    32-bit installed base, to woo application suppliers to our platforms,
    we have lost sight of the crucial reality that we must run a business.
    
    Reading management journals and hanging with process consultants is
    great, but our leaders left the barn door open.  We blew it with PCs,
    we blew it with UNIX, we hired people in the late eighties like the
    party would never end.  We have some of the worst information systems
    tools imaginable.  We gave up on having a industry selling focus after
    only five months.
    
    We are on the endangered species list and senior management thinks it
    is the Lion King.  
    
    Ironic as it seems, lack of information is our downfall.

    Re .22
    
    Well said.  
    
    Regarding PCs and priming pumps -- When Lucente was fdoing his town
    meetings, I raised my head above the rampart to suggest a similar
    message AND I told him of my sensitivity in using the lowest cost
    channel for the sale -- He told me I shouldn't worry about the low cost
    channel AND I shouldn't be selling PCs.
    
    Well, I sat down - only had a few holes in me - not fatal - and some of
    my counteparts get up and talk about "priming the pump."  Low yield
    explosion --
    
    I figure - Well, where he sits in the food chain, he just doesn't get
    it.  I continued the iniative -- Straight pricing -- Took down 50+ PCs,
    5 servers, complete fiber Hub Networking system, and some piss-ant
    consulting dollars --  System is going to be replicated in 12 sites
    over time.
    
    The pump was primed, the deal went through DECdirect, PC By Dec
    direct,  and Networks -- I didn't see one PO direct to me -- But every
    other channel got credit -- Ya know -- those low cost ones that are the
    darlings of DEC.
    
    I called my PC by DEC direct counterpart and told her that Lucente
    wanted be to drag my buns outta the initiative -- She wondered that if
    that was the case, how could they get business if they didn't get the
    DIrect peddlers doing the referrals.
    
    My personal opinion in the corporate kabookie dance is that the music
    is soon going to stop and when it does, I'll be ready - one way or the
    other -- In my world, this one counts -- Palmer and crew need to get it
    right or I'm gone.
    
    My HUMBLE .02
    
    Dennis

    re:-1
    
    	That last missive, sports fans, probably sums up how most of the
    sales professionals still left at Digital really feel. 
    	When I, for example, sit here on the 20th of July with no budget,
    no comp. plan (Mr. Roeth's brief memo to the contrary does NOT tell
    me HOW I'm going to be paid), no sales focus on FY95, my attitude is
    "it's job hunting time".
    	The base reason is real clear - I have four other people who depend
    on my income to have shelter, food, etc. If I do not know what my
    income is going to be at Digital, I'm damn sure going somewhere where 
    that fact will be known.
    
    		the Greyhawk
    known.

    
    I do not know of a single sales rep that has the authority to approve
    any allowance beyond discounts available as a result of standard
    business practice!   As stated previously we have business ops to help
    determine the profitability on a deal.
    
    As far as Q3, managment's directive was bring in revenue NOW! And I for one,
    being a sales professional, took management's direction and went after
    ALL the revenue possible and got my share.  Based on the quarter to quarter
    revenue comparisons it appears to me that my fellow sales professionals did
    a hell of a job responding to management's directive.
    
    For those of you trying to write the FY95 compensation plan for sales
    professionals keep in mind that whatever the plan, assuming it is
    viewed as fair, a sales professional will deliver on his or her
    commitments to the company.  Any way you choose to slice it it will
    come down to driving REVENUE.
    
    If you are thinking to yourself that I am somewhat offended by the
    reported comments of Palmer in the DVN, as well as, what I consider to
    be the periodic bashing of sales professionals in this conference, then
    your right!  
    
    John Gelineau
    Sales Representative

    
    	John, baby, lighten up. I am also a sales professional and the
    revenue driven metrics in DEC's Comp. Plan are causing the WRONG kind
    of behaviors.
    	Giving a customer 20% off on PCs to get a deal (based on revenue)
    is pure crap, and costs the company money. It sets the price
    expectation of the customer to an unprofitable model, and it cheapens
    our value-added.
    	Business Ops people in the field are always approving whatever
    field sales management tells them to approve. They hold their
    paychecks. So using that as a check/balance is pure hogwash.
    	Have margin contribution set sales compensation, and you don't
    need Bus. Ops in the field. Can you guess why that type of program
    hasn't been adopted? Hell, even IBM pays its sales force today on
    customer satisfaction (20%), margin contribution (40%), and NET
    revenue production (40%). 
    	I think its high time Digital got with the program, don't you?
    
    	And our current Plan for FY95 stinks. Period.
    
    		the Greyhawk
    

    Well it appears that the train is leaving the station on this one.
    
    Mr. Corson is correct.  We have no budgets, goals, metrics, true query
    based sales compensation database to access, no approved account
    assignmentss, no 300 member SME sales force in place ready to rock &
    roll on July 1 as promised in Q4, and in many cases around the country
    no local management in the trench *LEADING* our talented hard driving
    and survivor focused people up the hill.  After 11 years here and
    having just completed 1/2 of my MBA where we did case studies on what
    happened to companies that previously exhibited this kind of behavior
    this is absolutely amazing.  It feels like it's a big huge ass aircraft
    carrier roaming the seas.  The fleet admiral is up on the bridge
    pleading with the airboss to continue to launch jets against the enemy
    while downstairs on E-deck the steam catapaults hav broke down and
    there is no way to launch the Tomcats.  
    
    It's enough to send you off to your home and crack open your favorite
    mind alternating beverage and sit down with yourself and ask the
    almighty question:
    
    
    
    		"Does anyone really have any idea of what is going on?"
    
    I don't know if the Airboss or Fleet admiral reviews any of this stuff
    but if they do please just tell us what targets you want to hit and I
    guarantee you out of blind loyalty, love of country, family and SO's,
    we will all come back with lots of kills (read orders) under our wings
    and will get this outfit back on the move.  It can be done, we do have
    the capability to win this war, so let's get on with it for the good
    Lord's sake.
    
    Mav
    
    

    re last 2,
    
    I'm sitting here in Digital Consulting, attempting to deal with a
    Sales model problem that I thought was specific to DC - i.e.
    industry focus, budgets, goaling, profitability, etc....  and
    I've been stalling Field consultants' queries based on the
    newness of this as a "business" and its inherent complexity whilst
    escalating this up the management chain.
    
    Now I'm reading in last few that our beloved stack 'em high and sell
    'em cheap new powerhouse products business  (ABU, SBU et al) don't even
    have *BUDGETS* defined for FY95!!  Tell me that this isn't true -
    Please?
    
    
    /Chris.

.-1

From whom would you accept "It isn't true!" and believe it?

    just try to deal with customers these days. we don't know what the hell
    is happening inside of DEC. not so slowly that chaos leaks into the
    customer base and the press. and none of that does any of us any good. 
    
    and really. does anyone expect clear direction (re: leadership)
    anytime soon?

    I have several thoughts here:
    
    1. There is a Beavis and Butthead episode where they are watching 
    a video. One of them says, "hey this video sucks, change it!" The
    other one says "yah, I know it sucks now but it'll be really cool
    soon!"  The video, of course, never got any better.
    
    2.  I'll second what Gene said that customers are very interested in
    what the heck we are doing. To them it looks like total confusion. At
    least one reorganization too many. So much, it would appear, for
    no-excuses management. Even customers who have nothing to do with DEC
    stop me to ask what we are doing. I can only imagine what a HP or SUN
    salesmen will use to push their products.
    
    3. The quarter numbers must be awful. With the deafening silence about
    what how we are doing mandates this, I think. We have been installing
    everywhere and STILL can't make a profit. Charlie Matco had it about 
    right when he talked of the 275 MHZ alpha chip "and as surely as night
    follows day DEC is having another loosing quarter."
    
    Fred

    I really feel sorry for the folks that attend that DVN who think the 
    problem is sales.  Q3 sales were driven by marching orders from on
    high, not  over eager salereps ready to given away margin dollars for
    any sale! 
    
    If any of you think that the problem is going to be solved once we
    become channels based I only have one thing to say "GET A LIFE". 
    
    

>  As a general
>       and officers do for the army the management needs to do for us...
>       lead.

Note that a well-functioning system is a combination of bottom-up
(enumeration of options that are available that higher-ups may not be
aware of, plus cost estimates, etc.), and top-down (providing a focus
based on the available options so that there isn't a lot of working
across purposes, redundant efforts, etc.)  To be successful, the
top-down strategy typically has to be evolutionary over time (and
one problem we seem have had for many years if frequent right-angle
or 180 degree turns annually for a while, and more frequently over
the last few years.)  Likewise, to be successful, "bottom up" needs
to yield new ideas/options that are viable based on market considerations.
If either one falters you can get into trouble relatively quickly (and
if they both falter, you can get stuck in a nosedive.)

Yes, we need a consistent, strategic "evolutionary vision" of what
businesses/markets we're after.  We also need ideas on how to address
them (and address them ever more efficiently, etc.).  There are a lot
of people in this company, and that can translate into a lot of ideas,
and of which may be helpful.  Don't presume that the SLT (or whoever)
is going to generate all of the ideas to help us get out of the current
jam we're in (though they're definitely responsible for assessing/
deciding which options are the right ones and leading based on the results
of those decisions.)  Decisions can't be made (successfully) in a vaccuum...

    One more reply: I saw the DVN too and took offense when I heard I was
    supposed to stretch myself/work harder. I think now what he meant was
    that employees want to be, and should be asked to be, part of the solution
    more often. It may be that our current model of listening hard to the
    Customer goes this way: Customer -> Business Unit Mgr -> Engineering ->
    Planning/Implementation -> bloke who deals with the Customer and who
    goes "these Corporate people just are not with it"  
    
    It just may be that in our hurry to get the Voice of the Customer
    (VOC), reduce costs and improve Time To Market we forgot to ask Mr.
    Bloke (who sees the Customer every day) what HE thought. 
    
    It also may be that Mr. Bloke WAS asked, but he was so busy supporting
    revenue that he could not find the time to make it better for the next
    go-around. This is the case *I* am seeing. A lot.
    
    Guess what happens if Mr. Bloke does not like what he gets.....
    
    OK! Time to go home errr back to work. Stay with it folks. Decisions
    are too important to leave them to managers, but if you do not tell
    them what to decide, they'll make them anyway.
    
    Al
    
    
    
    
       
    
    
    
    
    

    That Pricing discipline comment was interesting -- Lucente stood up in
    front of us and told us CLEARLY that we were NEVER to lose a deal on
    price.
    
    Further, my management told me in the Q3 frenzy that upper management
    said we were looking at revenue Period -- Just get the deal.
    
    Soooo, as a tribe of ranting, raving peddlers we did just that -- We
    did what Lucente told us to do.
    
    This reminds of the 6 phases of a project - Something about the 6th one
    -- Praise and rewards for the non- paricipants -- Death to all others
    -- Or something like that --
    
    Anyway -- On balance, I liked Palmer's comments and I especially loved his
    "DEC-Nod" comment -- He could have only topped that by refering to the
    "DEC WHINE!"
    
    Dennis

    I was too wrapped up in what I was doing to go to the DVN this morning,
    and it doesn't look like I will make it to the 3 pm one either.  So,
    I'd really appreciate it if someone as usual eventually posts the
    transcript of it so I can read what BP said to us.  Anyone found it on
    line yet?
    
    /Charlotte

Criswell predicts it will be on Livewire by tomorrow.

Worldwide News                                 LIVE WIRE

Text of Bob Palmer's 'Employee Forum' ...                   Date: 21-Jul-1994

             Text of Bob Palmer's 'Employee Forum' address on DVN
         
         (Following is the text of President and CEO Bob Palmer's 
   "Employee Forum" address to employees.  A transcript of the question 
   and answer session will be posted in LIVE WIRE tomorrow.)
       
    Introduction 
   
         I know that you all have a lot of things on your minds, and, in 
   times of uncertainty, clear communications are more important than ever 
   before.
         Today's special edition of the "Employee Forum" is designed to 
   explain the reasons behind our strategic announcements of last week, 
   and to provide you with an outline of our actions and the context in 
   which those actions will be taken.
         In this time of critical transition for Digital, it is important 
   that all of us avoid overreacting to rumors and stay focused on our 
   individual responsibilities.
         As one example, I am particularly concerned about the disruption 
   that has been caused by the rumor that Digital is seeking to sell its 
   systems integration capabilities.  I would like to make a few points:
         Digital's capability in systems and networks integration is 
   absolutely essential to deliver our core value proposition to our 
   customers.
         We have a significant market share in systems and networks 
   integration.  External analysts place Digital in the top five when 
   ranking systems integrators, and our objective is to grow our market 
   position and to extend our leadership in client/server computing.
         We are not planning to sell this capability, as has been rumored.  
   We are looking for ways to increase our effectiveness in supporting our 
   largest customers and in reducing real or imagined conflicts with other 
   systems integrators whom we want to encourage to sell Digital platforms.  
   They represent an important indirect channel for Digital's products and 
   services.
         Similarly, we are in the business of providing outsourcing 
   services for client/server computing where we can capitalize on our 
   core networking and systems platform capabilities in supporting our 
   major accounts.
         There are many other rumors concerning Digital operations that 
   might be sold.  I want to assure you that I am dedicated to maintaining 
   those capabilities that support our core value proposition, which is to 
   deliver and support, directly and through partners, networked platforms 
   and applications in heterogeneous environments more quickly and more 
   cost-effectively than any other competitor.
         This value proposition is a key message in the Employee Forum 
   that you are about to see.  
         The forum provides answers to many questions on the minds of you, 
   Digital's employees.  You will undoubtedly continue to have questions, 
   even after you view the rest of this DVN.
         Ask them.
         My management team and I plan to go to great lengths to keep you 
   informed -- consistently and clearly -- about important decisions and 
   changes that will affect you and the future of Digital Equipment 
   Corporation.
         Thank you.
   
 
         This Employee Forum is a little different than the others we've 
   done.  Most of the others have been after the earnings announcements. 
   This one is a little ahead of the earnings announcement, primarily 
   because we've made some management changes.  I wanted to be able to 
   describe those to you, and where we are in the transformation of 
   Digital.  
         You've probably seen in print from time to time my reference to 
   this being Phase II of our transformation.  Phase I -- we've been at 
   this 21 months -- in Phase I we analyzed what we had in terms of talent 
   and bring in new talent to our company, stop the egregious losses that 
   we were suffering at that time, and begin to work on our cost 
   structure.
         We eliminated a lot of redundant engineering programs, as you may 
   recall, and simplified some of the structure.  We put in place some 
   business units, and we set the business units up differently.  Some 
   were stand-alone, essentially vertical organizations.  Some of the 
   business units had a traditional Digital culture associated with them, 
   the matrix structure that we've had for our entire history.  And we let 
   that go for a while.
         We did well the first year.  I think we improved the operating 
   results by several hundred million dollars.  But we didn't sustain 
   it.  
         As a matter of fact, our costs are still not competitive when 
   benchmarked against those of our leading competitors in similar 
   companies.  And we're still working on it.  So that's what I'm talking 
   about in terms of the second phase of this transformation.  We clearly 
   had done some things very well, and we also had done some things that 
   did not work well.  It's interesting that when you analyze the things 
   that worked well -- the PC division and storage -- you saw that they 
   had a common characteristic, and that they did not have the matrix
   characteristic of the ones that didn't do so well, like our traditional 
   core systems business.  And so this phase is building on what we 
   learned in the first phase, to make some very dramatic changes to 
   Digital Equipment that will enable us to be much more cost-effective 
   and return us to profitability in a sustained way.  
 
   The new organization 
 
         You've probably seen some headlines or whatever that talk about 
   matrix management at Digital is dead.  It's my intention that we, to a 
   95 percent level or so, expunge matrix management from our culture.  
   This is quite a dramatic change in Digital Equipment.  What you see in 
   a lot of the press reports talks about the restructuring reserves and 
   financial issues, but really from my perspective, this is a more 
   dramatic and important and long-lasting change in our company than are 
   some of the things that have been reported.  
         With respect to discussions and reporting and that, I had the 
   opportunity last week to talk to at least 150 of our top management.  
   We actually spoke to management before we spoke to the press.  I think 
   that's quite important.  It's impossible for me to speak to all 
   employees before we speak to the press.  But I personally spoke to the 
   management, then went out and talked to the press, so that's the way we 
   prefer to do it.  
         The purpose of being here this morning is to recap the highlights 
   of that announcement, explain the thinking behind that, and answer any 
   questions that you might have about how does that impact you and what 
   does it mean to Digital Equipment Corporation.  
         This matrix management idea may have been right, as I've said, 
   when Digital was an emerging company, a much smaller company. But my 
   own perspective is that sometime in the 1980s it became too unwieldy.  
   There were too many people you had to check with, because of all of the 
   overlaps in our matrix structure, before anything could actually get 
   decided and implemented.  And the computer industry began to speed up 
   quite dramatically, from four- and five-year product life cycles to the 
   very short product life cycles that we have today. Those short product 
   life cycles require a responsiveness to the marketplace, an agility, a 
   decisiveness, that we lacked with our matrix management structure.  So 
   what we've done is eliminate that, reorganize the company into a very 
   clean line organization, primarily by creating two new divisions, the 
   Computer Systems Division and our Components Division.
         The two new divisions, they each have within them three business 
   units.  You might ask, what's the difference between a division and 
   business units?  Actually, a division is a collection of business units 
   that have some synergy among them.  Each of the business units has its 
   own P&L, its own engineering, its own sales and marketing function, 
   channels of distribution as appropriate.  It's a complete line 
   organization with a P&L, and is responsible for the assets employed for 
   the first time in Digital's history. 
         Traditionally, we worried about revenue, occasionally we worried 
   about the cost, and the profit that ensued thereof after that.  Seldom, 
   I think never in our history, did we focus management on the assets 
   employed, the balance-sheet items.  The intent now, and what's in place 
   today, ensures that each of the business unit managers is responsible 
   for the assets as well as for the revenues, the costs, and the profits.  
   This is quite a dramatic difference, in that the large functional 
   organizations, like functional manufacturing, functional sales and 
   marketing, functional engineering, are largely being disaggregated and 
   being placed within the business units that they support.  So that we 
   then can have a very streamlined and market-driven, in terms of our 
   engineering products, organization.  And very easy accountability.  
         In the past, some of our structures did not work well, for 
   example the CBU structure that we put in place about a year ago.  When 
   you analyze why it didn't, it became quite clear.  The CBU manager had 
   the responsibility, but had to negotiate with engineering for the 
   products, had to negotiate with manufacturing about the costs, had to 
   negotiate with sales and marketing about selling those products, and it 
   turns out most of the energy was spent negotiating and internally 
   focused.  
         In the case of the very successful business units, like our 
   Storage Business Unit which was growing at more than 40 percent 
   annually, the PC Business Unit which was growing at more than 100 
   percent annually, they had complete line control.  They owned their 
   own engineering, manufacturing, marketing, and they were very effective.  
   And so we are implementing that structure that we've tested across all 
   of Digital.  
         In addition, you'll notice that there's an Advanced Technology 
   Group under Bill Strecker, who's vice president and chief technology 
   officer for this company.  That Advanced Technology Group has the 
   function of nurturing emerging technologies that might potentially have 
   market success or the opportunity for market success.  The kind of 
   process that we have in mind there is similar to that which was 
   implemented in Charlie Christ's organization around video on demand.  
   This is where where got a team of people focused on a problem, bring 
   some new technology to bear, were very, very successful.  And we now 
   want to spread that success, in the case of interactive multimedia, 
   across all of Digital's product line.  
         But the process is one that the Advanced Technology Group will 
   utilize to develop new capabilities, for example, in mobile computing, 
   object technology, or whatever.  And as those technologies reach a 
   critical mass, then we'd decide in which business unit should be 
   the lead business unit for that capability as we take it to the market 
   in a more aggressive way.  But you need some way do the engineering and 
   the advanced development without day-to-day worries about the P&L costs 
   and whatever.  
         So in a sense, it's a set-aside of research and engineering 
   resources and investment to ensure that there's growth in the future.  
   Because we want of course to maintain our technological leadership, at 
   least within a few very defined areas.  
 
   Downsizing 
 
         Now, in addition to that, as you saw, there were a number of 
   restructuring announcements this last week.  They have to do with the 
   continued work on our cost structure, restructuring the company, talk 
   about an elimination of approximately 20,000 positions over the next 12 
   months.  At the last DVN, I spoke of the need to get down to at least 
   approximately 65,000 employees worldwide for our level of revenue in 
   order to be competitive.  We talked about that in terms of a two-year
   program.  As we got into the details of this it's quite clear that we 
   need to accomplish that restructuring in a one-year time frame.  It's 
   also what our employees are asking us to do -- to get the downsizing, 
   at least these major downsizings, behind us so we can focus on growth 
   and focus on the future.  And so we're going to accelerate that into 
   the next 12 months, and as much as possible, we'll be done within this 
   calendar year.  As much as we can, in a thoughtful and planful way.  A 
   lot of people are working on that right now.  
         In addition to that, we'll continue the elimination of the 
   facilities and office space that we don't need, some of which we never 
   needed, that we had in our inventory.  I'm going to take out another 10 
   million square feet or so.  This will take us down at the end of the 
   next couple of years to about 24 million square feet.  This turns out 
   to be about half the number of square feet the company had in 
   facilities and office space in 1990, which was sort of our peak.  When 
   we started, as you'll recall, in restructuring manufacturing.  
         To do all of that, and to pay for the transition of employees 
   who will have to leave our company, we've taken a charge against 
   fourth-quarter earnings of $1.2 billion.  That's a cash charge.  
         In addition to that, there will be a charge of between $300 
   million and $400 million dollars that relates to some acquisitions that 
   we made in the past that no longer have the value that they're being 
   carried on our balance sheet, and also some tax considerations, and so 
   we'll clean all that up.  
         If you think about it, going forward, Digital will have a very 
   clean balance sheet, it's a very strong balance sheet, and we'll have 
   the opportunity by business unit to be profitable and to meansure our 
   success by business unit very clearly.
         In terms of that balance-sheet strength, it's frequently not 
   noticed that Digital will have a balance sheet even after the 
   restructuring that's in the Top 10, that's one of the best, of the top 
   50 companies in the Fortune 500.  And for that matter, in the Fortune 
   500, we will remain in the top quartile in terms of balance sheet 
   strength.  So the company has a very strong balance sheet.  We're not 
   about to go out of business.  We do need to start managing our affairs 
   more effectively.  We've got to start generating a profit, and as you 
   know, I've stated that our objective is to generate a profit for 
   operations by the end of the calendar year.  That again is additional 
   reason to do as much of the downsizing as we possibly can in the next 
   six months.
         Now, as you talk to people, as you get out and talk to employees, 
   there are several questions on your mind.  Some of which I'm going to 
   address up front, I hope, but I'll be happy, if I'm not thorough 
   enough, to take your questions after on the same subjects, and others 
   which we hope you'll ask after this presentation.
         One of the key questions of course is, am I going to have a job? 
   People want to know, are they going to employed?  What are the areas 
   where we'll be doing the downsizing, how will they be impacted.  People 
   want to know what's different about this restructuring, although I've 
   covered some of that already, in that this is building on our previous 
   successes and learning from what works and what doesn't work in the 
   marketplace of the 1990s.  Hopefully, it'll be able to give you some 
   confidence.  I have a lot of confidence in this new organization and 
   the leadership that we have in place.  Hopefully you'll be able to gain 
   some of that confidence.
         Well, "will you have a job" was the first question.  As I 
   mentioned at one of the previous DVNs, I can't guarantee your job.  I 
   can't even guarantee my own job.  The only person that can guarantee 
   that we remain employed are our customers.  They're the people with the 
   money, and we have the products and services.  The object of the 
   enterprise is to make a profitable exchange.  Sometimes we make the 
   exchange without it being profitable.  We have to work on that, but the 
   issue is, we have to service our customers more successfully than our 
   competitors if we want to stay employed.  And we've got to get our 
   enterprise sized to a level that is cost-effective. 

   Worldwide employee survey 
 
         I want to show you a tape, this is an excerpt, of the 
   conversation I had with the top 150 managers from across a variety of 
   different functions, at the last meeting, which was the Computer 
   Systems Division's kickoff meeting. I was talking to them about what 
   I'd learned from a recent employee survey that we did.  Now, we did a 
   worldwide employee survey.  And a lot of what came back was certainly 
   no surprise to me.  But there are a couple of points that I think 
   really needed some emphasis, and hopefully this tape will cover those.  
   You'll see that I am quite serious about it, having talked to my 
   management in this fashion.
         In going out and talking to our employees wherever I go, I find a 
   lot of motivated people out there.  People who want to contribute.  
   Yesterday, I sat through a presentation of the results of our Gallup 
   poll.  You may recall that we took a little poll here, worldwide, to 
   find out what employees are thinking.  It's not that pleasant, and yet 
   there are a couple of positive things.  Worldwide -- you'll get more 
   data than give you here -- but worldwide, there are a couple of 
   positive things, and one that's a real challenge to us in this room.
         One positive thing is that employees care about this company, and 
   you know that.  Another positive thing is that even if they're imacted 
   in the downsizing, they wish us well.  The challenge is that 
   overwhelmingly, they say we're not asking them to do enough.  They say 
   that we in management are not asking them to stretch, and they don't 
   feel engaged.  They don't feel that their full capabilities are being 
   brought to bear on this crisis that we have. 
         Each of us has a responsibility, and I'm taking mine this morning, 
   to ask everyone to get engaged.  To get engaged.  To participate.  And 
   you have a responsibility to listen to what they have to offer.  
   Because as everybody in here knows at a theoretical level, whoever's 
   closer to the work knows more about it.  We're not all that great about 
   listening, and we're not near as great as we think we are, based on this 
   survey, about empowering our employees to participate.  We are not going 
   to succeed in turning this enterprise around unless we get the full 
   participation from the employees that remain in it to contribute to that 
   turnaround.  You and I and the people who report to you and so on in 
   this company have that responsibility.
         So that's fairly clear, and it's a message that each of us has to 
   think about and internalize.  You should be looking to your management 
   for a clear understanding of what your job function is and how you can 
   add more value to the company.  You should not be satisfied with a 
   management that can't provide you with that direction and guidance and 
   leadership.  And I have to make sure that our managers are thinking 
   more expansively of how to engage all of our employees on a worldwide 
   basis in the turnaround of this enterprise.  
 
   Digital's value proposition 
 
         Now, if you think about Digital's value proposition and our 
   strategy and what it is we offer going forward, it's very clear.  We 
   said about a year ago that Digital was going to be a leader in open 
   client/server computing.  This is a similar statement.  It means the 
   same thing, but some slightly different words.  It talks about the fact 
   that we have the ability, directly and through our partners, to 
   implement and support networked platforms and applications in 
   heterogeneous environments more quickly and more effectively, [in] more 
   countries, than anyone else.  What does that mean again?  It means that 
   customers are almost all grappling with that problem of how to get a 
   heterogeneous environment -- that is, one that consists of different 
   hardware, different operating systems, different applications -- to 
   function efficiently in their enterprise, on platforms that deliver 
   good performance, good price/performance.  How do they do that?  
         This is a credible statement.  It builds on Digital's history of 
   essentially having invented distributed computing, of being a leader in 
   enterprisewide networking, of understanding technically what's 
   necessary in order to deliver a solution that lets applications 
   interoperate on a network.  Not just anybody can do that.  It's much 
   easier to describe than it is to make happen, and customers will pay 
   for that.  This requires that we retain the core technologies necessary 
   to deliver that message or that promise.  That depends, of course, on 
   our platforms, which are based on two architectures:  the Intel 
   architecture and the Alpha AXP architecture.  These architectures are 
   complementary in that you have the widest possible range of platform 
   performance from Digital Equipment Corporation, which includes Intel 
   from portable computers, desktop, desk-side, to servers and Alpha on 
   top of that with higher performance.  And we support three operating 
   systems.  
         Digital's open, as opposed to what we had been a couple of years 
   ago, which I'm going to talk about in a minute.  We offer the highest 
   performance.  Now, as we go forward through this restructuring, we have  
   to keep our minds on a few important principles that are deriving 
   everything we're doing here in management, and I thought I'd share some 
   of those with you.  
         The first is that it's important that we protect our installed 
   base.  That means that we insure that customers who have invested with 
   Digital's products and services in the past are taken care of as we 
   move forward, pruning some of our offerings and managing our way into 
   the future.  The asset base that we have, loyal customers that want 
   Digital to be successful, is our most important asset.  And so we're 
   certainly going to protect that.  Anything that you read about in terms 
   of divestments or strategies around Digital will have that uppermost in 
   our minds.  
         In addition to that, we have to organize our company to reflect 
   market realities.  It's unfortunate that the world is the way it is 
   somehow, but we have to understand that, and organize Digital in such a 
   way that we are competitive in today's environment and not the 
   environment of the past.  That's what we've been talking about in terms 
   of this restructuring.  It means that we have to depend on partners.  
   We can't do everything ourselves. And it means that for those partners 
   to put their applications on our platforms and move those platforms 
   through their channels of distribution, that we have to stop competing 
   with the major strategic partners that we have. This has implications 
   on our portfolio of activities, and we're keeping those in mind as we 
   go forward.  
         We have to build on our strengths, which are network, computing, 
   platform technology, the ability to build balanced systems, 
   understanding again the elements of that core value proposition that I 
   spoke about.  We need to engineer our products so that they're ready 
   for network interaction.  Internet-ready would be a good example.  As 
   you know, we are investing in developing technology for the Internet.  
   It'd be good if our products came ready to go. 
         We need to differentiate ourselves with respect to our global 
   service and support capabilities, which is one of our key 
   differentiators when compared to most competitors.  And so we think 
   about all of that as we make this organizational change and as we move 
   forward.  Taken together, this is going to enable us to be far more 
   agile, responsive, customer-focused, and we should be able to expand 
   our business through these other channels.  And that is essential for 
   Digital.
 
   Progress in last 21 months 
 
         If you think about the financials of the company over the last 21 
   months, it's been difficult.  We've only had one good quarter.  Most of 
   the quarters, we've been improving for the first five, and then we had 
   that Q3 which was a real wake-up call for all of us.  Big surprise.  
   And yet, if we focus too much on that, we might all of the things that 
   we've actually accomplished in the last two years, some of which are 
   quite dramatic.  
         Now, some of you have been here for a long time.  Just think back 
   two years ago.  Two years ago, Digital was described as being a closed, 
   proprietary minicomputer company.  Our primary way of generating a 
   profit was we raised our prices every year.  We were fortunate, because 
   our largest competitor raised their prices more.  So we looked like 
   we're giving you a bargain if we only raised our prices a little bit.  
   Those days are gone forever.  
         We were considered proprietary two years ago.  Today, we are 
   considered open.  And that "least likely to lock in a customer" quote 
   is from an article in Gartner, one of the analysts that studies the 
   computer industry.  They said, Digital is the least likely to lock you 
   in as a customer with some proprietary operating system.  That is a 
   dramatic change in perception.  Not all of the customers have yet 
   totally internalized that, but they will, because they read these 
   reports, it gets picked up, and it begins to change the image of our 
   company, and we certainly are different.  
         Two years ago, we had, unfortunately, inferior performance in our 
   products.  And we had inferior price/performance as a result.  Today, 
   as you well know, because of our Alpha AXP architecture, we have 
   leadership performance.  Nobody even argues anymore about who has the 
   phottest-performing systems.  Alpha is the hands-down winner, the first 
   fully 64-bit implementation, the only one that runs a 64-bit operating 
   system, clearly ahead of the competition.  And we are a price/performance 
   leader in all of the price bands, in less than two years.  
         Two years ago, we had a very inferior UNIX.  We didn't believe in 
   UNIX, we didn't invest in UNIX, our customers want to buy UNIX.  Most 
   of the growth in the last few years in the system side has been with 
   the UNIX operating system.  That growth has been enjoyed by our 
   competitors because ours was inferior.  In less than two years, our 
   engineering team, with a lot of hard work and a lot of investment, has 
   brought us from way behind to absolute leadership, according to some 
   analysts.  
         A couple of articles in the June time frame, one from Gartner 
   again, one from D.H. Brown.  The D.H. Brown article benchmarked 
   Digital's UNIX against all of the major competitors, and some very 
   minor competitors, and declared that we were the leader.  I mean, I 
   don't even make quite that expansive a claim with our customers, but I 
   do say we're absolutely among the leaders.  The Brown article said 
   we're the leader.  We have the best implementation of a 
   second-generation UNIX in leadership position in terms of capabilities 
   and performance.  
         Two years ago we were hopelessly inferior.  Two years ago, our 
   PCs were considered primarily a joke.  In the sense that it was 
   well-known that we had tried in the early '80s and failed, tried again 
   in the late '80s and failed, appeared to be trying in the 1990s and 
   failing, to take PCs seriously and to be a real player in the PC 
   market.  We've been identified by several, including Dataquest, that in 
   the last two years, Digital has had the fastest-growing PC business in 
   the world.  Today, our PCs are well-respected for their quality, 
   reliability, and capability, and we're growing, as I mentioned earlier, 
   at more than 100 percent per year.  And we're profitable, which is no 
   small feat in the PC business.  We're going to continue to grow 
   strongly there.  We now have a business that just finished at about a 
   billion and a half dollar run rate.  Next year it'll be more than a 
   two-billion-dollar business, and profitable.  In just two years. 
 
   New organization 
 
         New talent and new organization.  One of the key things, when we 
   attracted Enrico Pesatori to the company to run the PC business, is I 
   made a clear decision, and there were a lot of people advising me not 
   to do it, made a clear decision to have the engineering for PCs, the 
   marketing and sales channels for PCs, the whole thing for PCs separate. 
   And there were people saying, no, no, we want that to be part of our 
   central functional matrix-y stuff.  I'm saying no, I want to set that up 
   separately, like Charlie Christ's disks business had been separate.  
   Like our semiconductor operations had been separate.  You begin to get 
   a trend here. Those things that were separate and lean and line 
   organizations were successful.  And Enrico delivered, and is getting 
   promoted as a result to run the Computer Systems Division.
         Another executive that certainly delivers is Charlie Christ.  He 
   took our disk business, which was headed really into obsolescence.  I 
   mean we were pursuing a strategy of ever-bigger disks, 
   ever-more-expensive investments with little return, the wrong approach 
   entirely, and [Charlie] brought us into the modern SCSI disks, high 
   capacity, high reliability, high performance, and profitable at the top 
   end of the market. He did an excellent job, and Charlie's being 
   promoted, as I mentioned, to run the Components Division.  
         So it's good that we focus on these successes.  We talk about 
   what have we been able to accomplish, and there's other accomplishments 
   as well.
 
   Progress with Digital's partners 
 
         So we talk about the conflicts that we've had with our partners.  
   Partners, whether they're distributors, value-added resellers, had come 
   up to me and said how extraordinarily difficult it is to do business 
   with Digital, to support their applications or their products on our 
   platforms.  Well, we've made a lot of progress.  A couple of years ago, 
   less than a third of our products -- talking about products now -- less 
   than a third moved through indirect channels.  In the year just ended, 
   it'll be about 55 percent.  Next year, we're going to drive that to 
   over 60 percent.  The goal is 63 percent.  
         This is primarily because of the success we had in the business 
   that drove those indirect channels -- PCs, disks, and Larry Cabrinety's 
   Components and Peripherals.  Larry in particular developed a lot of new 
   channels that had never done business with Digital through which we 
   moved all kinds of peripheral products.  Things like our single-board 
   computers to the OEMs.  Things like our videos, our printers, were very 
   successful.  We can continue that success.  It's a much lower-cost way 
   of delivering our products to our customers, and we have to do that.
         You know, two years ago, we didn't even have any Alpha AXP 
   systems.  Hadn't shipped any yet.  We had the chips, we hadn't shipped 
   any systems.  And today we have a full line of Alpha AXP systems as 
   well as Intel architecture systems.  We didn't have any applications. 
   Today we have almost 6,000 applications for our Alpha AXP systems.  
   About half are for UNIX, and a few hundred for Windows NT.  
         A couple of years ago, we had all matrix structure, essentially 
   no accountability, and no ability really for management at hardly any 
   level to understand where we made money and where we lose money, where 
   the investments pay off and where they don't.  We've been moving 
   steadily toward a much more accountable structure, and as I mentioned, 
   we now have a structure that we've just implemented that not only 
   includes revenue, costs, and profit, but also the balance-sheet items, 
   the assets employed in the business.  And each of those business units 
   has its own model, so that you can measure it and benchmark it against 
   external competition.  And that is the benchmark: the external 
   competition.
 
   Return to profitability 
 
         I'm quite optimistic, frankly, about these changes.  They're 
   based on what we've learned worked, they're based on proven executives 
   that came in and contributed and made a real impact on our company, or 
   [who] had been here before and demonstrated their leadership and are 
   being promoted.  With that kind of leadership and commitment, with the 
   dedication to this turnaround, with our employee involvement, there's 
   no question in my mind that we will return to profitability. 
         We need to have that profitability from operations by the end of 
   the second quarter.  The reason we need that is we need to restore 
   confidence in our customers about Digital's prospects.  Today, some of 
   our customers are reluctant to buy our products and services because our 
   competition is telling them we're not going to make it.  That's far from 
   true.  Our balance sheet is stronger than that of most of our competitors.  
   But until we start generating a profit, there'll always be some doubt in 
   some of those customers.  We need to return to profitability quickly.  
   We have the talent that we need to do that; we have the organizational 
   structure we need to do that; we have a value proposition that is credible 
   with our customers; we have a strategy to implement; we need everybody 
   involved.  With that kind of involvement, there's no question in my mind 
   that Digital will return to profitability, and we'll begin to grow again, 
   which is a good deal more fun than all of the downsizing that we've 
   been having to go through.  
         Now with that I'd like to answer any questions that you might 
   have about any of these remarks, something I didn't cover that you were 
   interested in, whatever.  It's very informal, and I would appreciate 
   your questions.

                       FOR DIGITAL INTERNAL USE ONLY

Thought stuck me as I read the latest reorganization story on
BP.  The phrase 'new Digital' is used in the org chart.

Am I correct in recalling that the sequence over the years has 
been:

	DEC -> New DEC -> Digital -> New Digital ?

Ah, where is good old Petronius when we need him?

    
    Is there anybody out there who has 'taped' the Q&A session?
    
    We couldn't seee the DVN because our DVN coordinator was on
    vacation ...
    
    	Ach!m

    Does anyone in your office know how to turn on a TV and change the
    channel??

    
    Well, I just have to wonder if the TOP 1000 accounts are the TOP
    1000 accounts by REVENUE or PROFIT.  If accounts are  ranked by
    revenue, we are no  better off determining which accounts are
    actually PROFITABLE.
    
    Anyone know the answer to this?
    
    LLB

    Re:  .46
    
    TV  - that mysterious little box that carries images of things like
    		World Cup Football, The OJ Simpson trial and Digital DVN's
    		Some say TV is destroying the social fabric of human life.
    Channel  - The stretch of water seperating Great Britan from the rest
    		of the civilized world.

    Re: .-1
    
    Eben ist der Groschen gefallen ...
    
    
    	Thanxs
    
    		Ach!m
    
    
    Bye the way: does anybody have the Q&A session 'online'?

    It's supposed to be on VTX Live Wire later today.

    Prez Palmer made a very interesting comment in his DVN yesterday.
    
   >      There are many other rumors concerning Digital operations that 
   >might be sold.  I want to assure you that I am dedicated to maintaining 
   >those capabilities that support our core value proposition, which is to 
   >deliver and support, directly and through partners, networked platforms 
   >and APPLICATIONS in heterogeneous environments more quickly and more 
   >cost-effectively than any other competitor.
    
    Note how he used the word "applications" (which I capitalized).  I
    guess that the sale to CSC is off and DIGITAL is again in the business of
    being a software comapny in addition to being an ironmonger.
    
    I would say that the value od DC is much higher to DIGITAL than to CSC.
    
    How about that for the latest installment of the soap opera "Daze of
    our Lives".
    

I wouldn't read too much into Palmer's words. Partners can deliver
applications too. Better than us, in some cases.

Frankly, I didn't learn much from Palmer's talk. This wasn't one of his
more articulate performances, in my opinion. Looking forward to the Q&A.

>   We can't do everything ourselves. And it means that for those partners 
>   to put their applications on our platforms and move those platforms 
>   through their channels of distribution, that we have to stop competing 
>   with the major strategic partners that we have. This has implications 
>   on our portfolio of activities, and we're keeping those in mind as we 
>   go forward.  

I read this as meaning that Bob intends to get rid of Rdb and applications
software.

    > At the last DVN, I spoked of the need to get down to at least aprox.
    >65,000 employees worldwide for our level of revenue in order to be
    >competitive. We talked about this in terms of two-years.
    
    Skip a couple of line
    
    > And so we're going to accelerate that into the next 12 months, and as
    >much as possible, we'll be done within this calendar year.
    
    repeat: We'll be done within this calendar year.
    
    Is it 12 month's or 5 months?
    
    

    
    
    
      Reply .47  Linda,
    
    
      What he means by the top 1000 accounts is probably the top 1000 large
    accounts by $$$$. Just my opinion...
      

re .54:

He meant 12 months, with the bulk of the layoffs being complete by the end
of the calendar year.

    
    
    Isn't that what was going to happen last year??????

One thing he said struck me as quite, mmmmmmm, curious.

   "Today,
   as you well know, because of our Alpha AXP architecture, we have
   leadership performance.  Nobody even argues anymore about who has the
   hottest-performing systems.  Alpha is the hands-down winner, the first
   fully 64-bit implementation, the only one that runs a 64-bit operating
   system, clearly ahead of the competition."

Isn't everybody saying *they* have the "hottest-performing systems"?

Bruce

P.S.: Re: software company,  I was walking back to my desk from the water 
fountain the other day.  While attempting to shake the excess water from my
"Digital is software company" coffee mug, I lost my grip and it shattered into
about twenty pieces.  I picked up most of them and Scotch(tm) taped them back
together.  

>  While attempting to shake the excess water from my "Digital is software 
> company" coffee mug, I lost my grip and it shattered into about twenty 
> pieces.  I picked up most of them and Scotch(tm) taped them back together.  

Yes, but it doesn't hold water... :-\

	-Stephanie

    Just saw the Scott Roeth memo on the "new" Account Focused strategy for
    Global account..."now that we're moving away from geographical
    focus..." Is there an echo in here or have we reach some form of an
    organizational standing-wave state where organizational approaches and
    structure changes now reverberate back and forth across the
    organization perpetually? 
    
    Also wanted to comment on the budgeting by quarters...at least they're
    getting closer to the real business horizon in todays world. Anything
    much more than a qurater out is a guess anyway.
    
    ;^) Norm