| There is an article in a magazine called INFORMATIONWEEK dated 8 Aug.
DIGITAL DOLDRUMS
Digital Equipment Corp last month slammed the doorr ona dreadful fiscal
year and crept cautiously into a period of change. The computer vendor
disclosed that it lost $2.15 billion for its fiscal 1994 ending July 2,
its second largest annual loss ever. That compares with a net loss of
$251 million in fiscal 1993 and a whopping $2.8 billion loss in fiscal
1992.
Digital CEO Robert Palmer says his goal remains to return the company
to profitability by the end of calendar year 1994. But the taks is
daunting, especially considering that 4th quarter revenue remained
virtually flat at $3.92 billion, compared with $3.19 billion for the
same quarter last year. Even worse, year end revenue fell 6% to $13.45
billion from $14.37 billion in fiscal 1993.
Even if Digital wasn't dealing with the multitude of business problems
it faces, it's still undergoing enormous changes, culturally and
otherwise, says Franc Romano, an analyst with the Aberdeen Group, a
Boston consultancy.
Still, some observers say Digital may have a shot at recovering as long
as it gets expenses under control and revenue picks up, particularly in
sluggish operations such as services. In fact, Wall Street reacted
favorably the day of the announcement, boosting Digital's stock by 5%.
In light of the upcoming layoffs and positive ALPHA growth, it just
might sqeak by with an operating profit by the second quarter of fiscal
1995 as Palmer hopes says Chris Christiansen, research director at
International Data Corp in Framingham Mass.
The elimination of 20,000 workers-9,000 last quarter and 11,000 this
fiscal year-will bring the head count to 65,000 next year, allowing
Digital to trim about $500 million in expenses, says Digital chief
financial officer Vin Mullarkey. While revenue was lackluster, the
company sees hope in its ALPHA systems sales, which rose 164% over last
year, totalling about a third of all systems revenue in fiscal 1994 and
outselling VAX systems for the firsst time.
While service revenue slumped in fiscal 1994 to $6.3 billion, down from
$6.8 billion in fiscal 1993, Palmer says it's important for Digital to
keep its multivendor systems intergration business going-despite rumors
that a for-sale sign is posted on that operation.
[Reprinted without permission]
Author Marianne Kolbasuk McGee
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