Conference 7.286::digital

Maybe the preferred stock will pay dividends?

Dave

    
    
    	All I remember about preferred stock is that it has priority
    	over common stock should the company liquidate. Bonds have
    	priority over stocks, if I remember correctly.
    
    	Of course I'm not a finance major so this could all be incorrect.
    
    	John

re:.2
	Does this open the possibility that top management will 
	grant themselves preferred stock options and then later
	should the company liquidate... they will get their money
	but us low grade stock holders will get $0.00?

	Phil

    The strict order of liquidation is:
    
    	a) Goverment Debt
    	b) Insured Debt (Mortgage, Bonds)
    	c) Preferred Stock
    	d) Common Stock
    
    	However, employees are as important as the goverment if a company
    owes them salaries.
    
    	On Preferred Stock.
    
    	My opinion is that we should know what is the scoop. I will explain
    myself.
    
    	Preferred Stock is called that way because it will have a higher
    order in the cases that are specified in the prospectus.   What this
    means is that you can have preference over something else in:
    a) Earnings, b) Stock Splits, c) Stock Conversions, d) Voting
    Rights, among other.   As common stock holders, the company executives
    must inform what are they going to include as preference over in the
    prospectus if and when they decide to issue stock.   Also, how many
    stock they are planning to sell and if the 'stock dilution clause'
    will in any way change.  (You as stockholder are supposed, by the SEC,
    to have priority of purchase in case there are more stock being
    offered.   This is done so the percentage of ownership in a given
    corporation is not diluted.   It is your decision to say yes or no.)
    However, one of the things that a Preferred Stock may have in their
    prospectus is that they are preferred in buying rights, jeopardizing
    the stock dilution clause as required by the SEC.  

I believe that most (all?) preferred stock has not voting rights...

    In most, but not all cases, Preferred stocks do pay dividents.  That's
    waht attarcts long term investors who also need the income.  What is
    good for Digital is that it allows the company to issue them and raise 
    needed cash.
    
    This thing is not new.  I recall reading someting about it a couple of
    years ago.  that by fy1995 we will pay devidents (or something to that
    effect).  I guess this is in preparation for FY95.
    
    I also know that when our stock was a high flying darling in
    Wall-street, many people were asking for DEC to give dividents.  There
    were some discussion of divident on the now-lost-in-mis-heaven 
    SUBWAY::DIGITAL_INVESTING which would be a better place to continue
    this topic (should the note find its way to the net again).
    
    my .02

    Traditionally, preferred stock has several well-defined
    characteristics:
    
    1. It ensures that some stock holders get their before the rest get
    theirs upon company liquidation
    
    2. It frequently conveys enhanced voting rights to the holders
    
    3. It gives its holders a more favorable stock split or conversion
    ratio
    
    4. It is traditionally trotted out when a company is in decline and the
    people running it know there aren't enough life boats
    
    5. It establishes two classes of stockholder: "Us" and "Them"
    
    
    
    kbs
    

Re:
Note 2684.7              Preferred Stock - what and why?                  

    
   >4. It is traditionally trotted out when a company is in decline and the
   >people running it know there aren't enough life boats
    
	I like this one.  I also thought that this "Preferred Stock" 
	thing was the new Digital's concept of "More Choices!"
	As in "When the ship goes down, do you want a life boat,
	life raft, or life preserver?"

    MR1PST::AVNGRS::BOELKE
    
    	What you have point out is correct.
    
    	It has to be specified in the prospectus if the preferred stock
    will have voting rights or not.
    It has also has to be specified how, when, and how many voting
    rights they have.   Therefore, not always one preferred stock is
    equal to one vote
    
    	Dividends
    
    	Again correct general information.   Preferred stock are sometimes
    preferred when and if dividends are declared.   However, there are some
    type of preferred stock that are more like bonds.   These preferred 
    stocks have a pre-determined amount of dividends (minimun) that the
    company MUST issue irregardless of financial situation.  So, just like
    your mortgage, you must pay these even if you are in the red or else
    you are forced to declare bankrupcy.
    
    	Again, if the general rules for the preferred stock issuance are
    understood beforehand, there should be no problem.   The issue that
    I see here is that DEC management is asking us for a blank check.
    That is very/extremly dangerous.

                                                            
    Why Preferred stock?  If we need capital, why not simply issue more
    common?  I also understand we still have a decent wad of cash in the
    bank and might not need further capitalization.
    
    Does anyone know more about what happened to MOS after BP left?  Were
    they not sold to another company?  What happened to the common
    shareholders of MOS? Did MOS issue preferred stock?  If so, how did the
    preferred shareholders fare?
    
    Also, how much of our stock in in the hands of institutions?  Does 
    our vote really matter in the scheme of things if enough institutional
    investors give the thumbs up?
    
    -Ed

    	Who got this memo?  I did, and I own stock -- some held at
    	Investor Services, and some held by my broker.
    
    	Some other co-workers who own stock didn't get this.
    
    	Who is @DISTRIBUTION_LIST?
    
    ------------------
    
    	I found this memo to be disturbing.  I agree that it is carefully
    	worded so that it doesn't specifically say how to vote, but the
    	underlying message is certainly clear.  I guess that technically
    	this memo is not out of line, but it certainly draws close to
    	the line.

     
    talking about investor services, i just love to be talk to a human over
    there, to sit down with someone and move some of my money that i have
    in the SAVE plan from this group to that group and to ask questions
    like that. any one knows if there is a way to talk to a human
    at investor services who can spend few minutes with you to do this?

    is there like a phone number to SAVE plan people you can talk to? (not
    to a computer but to a human?), and where do they sit any way?  may
    be i'll go invade their cubes and catch someone one off guard and
    have a face to face chat over a hot cup of coffee where they can answer
    any questions DECees might have ?

    thank you,
    \nasser

re .7
>    1. It ensures that some stock holders get their before the rest get
>    theirs upon company liquidation

Preferred stock gives the right to recieve money prior to later claims.  If 
there is a dividend on the preferred (which is standard), all back 
dividends on the preferred must be paid before dividends can be paid on the 
common.  As Digital common does not have dividends currently, this is not a 
concern.  

Debts to the Government and to employees are paid prior to any 
distributions to preferred stock holders in the event of disolution.
    
>    2. It frequently conveys enhanced voting rights to the holders

This is actually quite rare in the cases where preferred is offered AFTER 
there is a common stock offering.
    
>    3. It gives its holders a more favorable stock split or conversion
>    ratio

This will have to be defined in the prospectus.  We need to see what 
the rights are prior to voting.
    
>    4. It is traditionally trotted out when a company is in decline and the
>    people running it know there aren't enough life boats

Balderdash.  The largest class of preferred stock companies are utilities. 
The need for capital with less restrictions than debt led to this. 
    
>    5. It establishes two classes of stockholder: "Us" and "Them"

I hardly see where a decision on what you buy causes this divergence. You
too can be a preferred stock holder.  If your implication is that the
preferred stock will only be offered to managers, then I would suggest that
they have better and more secure ways to reward themselves than a method
that requires a vote by stockholders. 
    
I would guess that Digital wants to make equity in the company available to 
the many potential buyers that can not currently purchase the common stock. 
The restrictions are less, and the ability to create a class of owner who 
is not as rewarded by growth but rather by income could help raise the 
money in a way better than many alternative methods.

From the cases you refer to, you may remember that preferred often does not 
rise in price as much as common due to limitations in retained earnings 
distribution models.

Matt Haley

    
>>    3. It gives its holders a more favorable stock split or conversion
>>    ratio

>This will have to be defined in the prospectus.  We need to see what 
>the rights are prior to voting.
 
    I assume this disclosure is required by law no?  

>I would guess that Digital wants to make equity in the company available to 
>the many potential buyers that can not currently purchase the common stock. 
>The restrictions are less, and the ability to create a class of owner who 
>is not as rewarded by growth but rather by income could help raise the 
>money in a way better than many alternative methods.
    
    Who would be subject to the restrictions on common stock?  What are 
    the restrictions anyway?   If issuing preferred is just a better way
    for us to get some capital, I'd be all for it.  What I don't understand
    is WHY preferred is better than common.  Would it be impossible to
    issue a new, say, Digital "series D" common stock that pays a dividend?
    
    I'm also suspicious because I've heard that stock can be issued to
    close a merger or acquisition.  Can you offer newly created issues to
    another company to close such a deal or must all of the new stock be
    offered on a stock exchange?
                                                                
>From the cases you refer to, you may remember that preferred often does not 
>rise in price as much as common due to limitations in retained earnings 
>distribution models.                  
    
    Yeah, but what does that have to do with voting rights or a possible
    buyout?
    
    Yeah, I sound nervous and paranoid, but I've only had 2 courses in
    finance and zero practical experience.  You seem to know more than I,
    Matt, and I appreciate if you could eliminate any of my misconceptions.
    
    Thanks!
    
    -Ed
    
    (P.S. Not that it matters too much cuz I sold three 
       weeks ago at $42+ ;-) ;-) ;-))
    
    
    
    

Matt Haley

    Ed, the basic purpose of common stock is to have a broader investment
    scheme for potential investors.   Companies want the investors to have
    at their disposal: 1) appreciation and owership (with stocks),
    2) conversion and special considerations (with Preferred Stocks)
    and 3) steady income (with bonds).
    
    	As I have said all along, I do not see anything wrong in DEC
    wanting to have this flexibility with potential investors.  However,
    it must be clear what the real purpose is.   As Matt has mentioned,
    per the SEC requirements, it all has to be specificly disclose thru
    a prospectus.    If DEC management, sent us, stockholders, the
    prospectus or better post it here in the notesfile, so that everybody
    that is interested can discuss it and ask questions, then all our
    questions, concerns, etc can be answered.   Now, asking you sign that
    check no matter who, what, when, where, how........does not make a lot
    of sense.

    
    Is there a legal waiting limit between the time the prospectus is
    issued and the time the common shareholder vote gets taken?  Can they
    pass out the prospectus at the annual meeting 5 minutes before they
    take the vote or what?
    
    -Ed
    

re .14

>>>    3. It gives its holders a more favorable stock split or conversion
>>>    ratio

>>This will have to be defined in the prospectus.  We need to see what 
>>the rights are prior to voting.
 
>    I assume this disclosure is required by law no?  

Absolutely.  (I did all >> because I thought the string needed them, sorry 
for the trail.)

>>I would guess that Digital wants to make equity in the company available to 
>>the many potential buyers that can not currently purchase the common stock. 
>>The restrictions are less, and the ability to create a class of owner who 
>>is not as rewarded by growth but rather by income could help raise the 
>>money in a way better than many alternative methods.
    
>    Who would be subject to the restrictions on common stock?  What are 
>    the restrictions anyway?   If issuing preferred is just a better way
>    for us to get some capital, I'd be all for it.  What I don't understand
>    is WHY preferred is better than common.  Would it be impossible to
>    issue a new, say, Digital "series D" common stock that pays a dividend?
 

Many mutual funds and even a higher percentage of pension funds have
restrictions on the amount of nondividend stock they can hold.  (Many are
at 0%).  Since we are still in the dark with regard to why the preferred is
being offered, a class "D" might work.  That may be exactly what they are
doing.  

>    I'm also suspicious because I've heard that stock can be issued to
>    close a merger or acquisition.  Can you offer newly created issues to
>    another company to close such a deal or must all of the new stock be
>    offered on a stock exchange?
 
Sure, you can offer newly issued shares to close a deal, with the approval 
of the current stockholders.  That is the whole point.  Management is 
limited in what they can do with stock without shareholder approval.  Very 
little can be done except for the shares held in the Treasury account
                                                               
>>From the cases you refer to, you may remember that preferred often does not 
>>rise in price as much as common due to limitations in retained earnings 
>>distribution models.                  
    
 >   Yeah, but what does that have to do with voting rights or a possible
 >   buyout?

Buyouts are at the discretion of the shareholders.  Usually the first to go 
(imho) are the managers of the purchased companies, so if your fear is 
about our management, you may wish to rethink that.
  
>    Yeah, I sound nervous and paranoid, but I've only had 2 courses in
>    finance and zero practical experience.  You seem to know more than I,
>    Matt, and I appreciate if you could eliminate any of my misconceptions.
    
I only know from a few courses and being bought twice.  Once I was the 
employee representative on the board.  I voted for being purchased because 
it seemed like the right thing to do, then I "quit" as I was now excess.  
The company buying us used Treasury shares and both companies put the issue 
to all the shareholders.

My basic thought is that this is the 2nd smart thing I have seen finance do 
in the last few years, I am going to trust Mr. Palmer until I see the 
prospectus and the ballot.  Then I will read and vote.  I hope everyone 
reads and votes.  I would ask those who reject what they don't understand 
to make a real solid attempt to understand.  If investor services can't 
write a resonable ballot explanation, perhaps we can continue the 
discussion here?

Matt Haley

Just another tooth...

.14> is WHY preferred is better than common.  Would it be impossible to
.14> issue a new, say, Digital "series D" common stock that pays a dividend?
    
    Too bad Sweeney's not here to answer definitively.  One problem is that
    in recent years the New York Stock Exchange has become more restrictive
    in what kinds of multi-class stock it will list.  Plus, frankly, if you
    want to attract new investors it is better to use a standardized (dare
    I say "OPEN"? :-) concept.  Every investor understands what is meant by
    the term "Preferred Stock".  OK, every BIG investor.  Defining a new
    "class D common" sounds a lot like some sort of snake oil solution is
    being proposed.  DECpreferred oops I mean DigitalPreferred will have a
    readily understood place in the market.
    
    Given the way our stock has rocketed in the past, a convertible
    preferred (at these interest rates!) would be an excellent way to
    raise more cash at competitive rates.
    
      John

    Re;16
    
    	There are certain requirements issued by the SEC as of how, when,
    where, who, what the prospectus must contain and when it has
    to be issued.   Since, I don't have my SEC guidelines book
    with me here, (I don't recall if I have it at home and they are
    not common in libraries) I can not tell you when (time schedule)
    DEC has to issue the prospectus.   I know one thing, it has to
    be issued before the preferred stock (common stock) issues goes
    out for selling purposes in order that all stockholders in record
    can read and comment on it.   So I guess that is not five minutes
    before the meeting.

    
    Lemmie get this straight:
    
    It is just a question of names?  Can you have a preferred stock that
    is, essentially, a common stock with a dividend?  What about
    liquidiation?  Do all preferred stockholders get paid before the common
    when the company goes belly-up?
    
    -Ed
     

As far as I understand, they are being pro-active.

If the company wants to issue new shares, it must have approval from its
existing shareholders. The company wants to get this approval now, just in case.
After all, the next opportunity is next year's annual meeting (unless they have
an exceptional meeting of shareholders).

The reasons for asking this for "preferred stock" only could be:

* maybe because "preferred stock" is more attractive to the SE,

* maybe because a previous approval wrt "common stock" is still valid,

* maybe because they do not need it for "common stock", because of the shares
  the company has bought back.

    Preference shares are effectively debt, which pays a fixed return.
    
    So the memo appears to indicate that Palmer wants the flexibility
     to borrow money in future.
    
    It probably wouldn't be good to do this through diluting equity further.
    This would not be good for the share price.
    
    Peter

    
    What about the stock purchase plan?  Will we be given common or 
    preferred?  Or do we get a choice?
    
    

    Why are we preparing ourselves to raise additional cash ?
    
    	-Growth driven ? (expansion in assets, inventory, receivables,
    plants - (semiconductors for Alpha))
    	-Another re-structuring charge ?
    
    	- Cover Losses ?
    
    Why preferred and not more debt or common stock ?
    
    	- debt expensive ?
    	- common stock too low ?
    
    

	Well, I read up on this last evening, but do not have the
        book in front of me.  Here's my take:

	1) Preferred stock is higher risk to investors since the
           dividends are not guaranteed to be paid by the company
           issuing the stock.  This means higher risk to investors,
           with potential higher reward.

	2) Preferred stock holders are get priority (paid before) 
           over common stock in the event that a company goes belly up.

	3) Preferred dividends are paid out of earnings before 
           calculating any common stock earnings or common stock price/share.

	4) Since other corporations can buy preferred stock and a portion
           of the dividends are exempt from taxes, preferred stock is
           a way to get other corporations, etc... to invest in Digital.


	LLB	
 
          

    I seem to recall that preferred stock produced fixed dividends,
    meaning that the company could not increase (nor decrease, as has
    been mentioned) the dividend.  So, preferred stock has a narrower
    range of potential than common stock.
    
    						Ann B.

A meaningful explanation of the differences between preferred stock and common 
stock (and bonds) is complicated and takes far more time than I care to spend 
typing in on a Notebook PC Keyboard. :-)

However, I can condense advantages/disadvantages for Issuer and for Investor 
into a few paragraphs.

From the viewpoint of the ISSUER...

ADVANTAGES:
By selling preferred stock, the issuer avoids the provision of equal
participation  in earnings that the sale of additional common stock would
require.  Preferred stock also permits a company to avoid sharing control
through participation in voting.  In contrast to bonds, it enables the firm to
conserve mortgageable assets.  Since preferred stock typically has no maturity
and no sinking fund, it is more flexible than bonds. 

DISADVANTAGES:
Characteristically, preferred stock must be sold on a higher yield basis than 
that for bonds.  Preferred stock dividends are not deductible as a tax expense.

From the viewpoint of the INVESTOR:

ADVANTAGES:
Preferred stock provides reasonably steady income.  Preferred stockholders have 
a preferrence over common stockholders in liquidation.

DISADVANTAGES:
Total ROI is potentially limited.  Price fluctuations in preferred stocks are 
far greater than those in bonds, yet yields on bonds are frequently higher.  
Preferred stock has no legally enforceable right to dividends.  

One cut from the issuers perspective that may, indeed, be relevant to today's 
market place is this: The costs of preferred stock financing follow interest 
rate levels more closely than common stock prices.  Therefore, when interest 
rate are low, the cost of preferred stock financing is likely to be lower than 
the cost of common stock financing.

Hope this helps,

Dave

When I got the Email yesterday I immediately replied with the same questions
and comments Alfred made in his second paragraph of the basenote.

Anybody wanna lay odds as to how long I'll have to wait for a response from
the A-i-1 account of the Office.of.the.president?

Now, does anybody wanna lay odds as to whether or not the response might be
comprehensible by the financially challenged?

-Jack

    Well, I got my prospectus.  It lists a bunch of things that preferred
    stock can be used for, none of which there's any current plan to do at
    Digital.  Some quotes:
    
    "the Board will determine all designations, preferences and limitations
    of such stock, including ... dividend rights, ... voting rights, ...
    and the other special or relative rights and priviledges and
    limitations or restrictions..."  Well, that's comprehensive!  Let us
    issue Preferred Stock, that we can define to be anything we please!
    
    "holders of shares of Preferred Stock will not be entitled to more than
    one vote per share when voting as a class with the holders of shares of
    Common Stock;"  Does this mean that there can be votes (not at stockholder 
    meetings) that only the holders of Preferred Stock are involved in?  Or
    does it mean something else that I can't figure out?
    
    It goes on to state that the Preferred Stock could have preferential
    dividend rights and liquidation rights.  These rights have to be
    defined before the stock is issued, but no further stockholder
    approval is needed to define the preferences or issue the stock.
    
    For what little it's worth, I'm voting against.  It will pass, of course.
    
    		Larry Seiler
    
    

    
>>    "the Board will determine all designations, preferences and limitations
>>>    of such stock, including ... dividend rights, ... voting rights, ...
>>    and the other special or relative rights and priviledges and
>>    limitations or restrictions..."  Well, that's comprehensive!  Let us
>>    issue Preferred Stock, that we can define to be anything we please!

With that kind of wording,  I'm voting against.  From the view of a 
shareholder, the board has already helped to screw this company up enough 
that I can't trust them with that much lattitude.

Garry

    	I'm not willing  to type the entire prospectus in either.
    However, the thrust of the prospectus is that this is a one-time
    authorization for a "series" of preferred shares with possibly
    different characteristics, all to be determined by the BOD,
    and while no specific purpose is currently planned, there are
    a variety of potential purposes listed.
    
    	If the proposal is ratified, the BOD will have very wide
    latitude (complete carte blanche) in issuing preferred shares
    whenever and for whatever purposes and using whatever definition
    (properties) it wants.
    
    	Due to the sweeping power this would transfer, and lack of
    a clear purpose stated, I'm voting NO.  I would possibly consider
    a specific proposal with a specific goal and terms laid out.
    This proposal is asking the shareholders to "trust us".
    
    I trust everyone, but I cut the deck...
    
    Dave Eklund
    

 Digital - Standard & Poor's lower's debt rating
        {The Boston Globe, 24-Sep-93, p. 70}
   Standard & Poor's Corp. said it has lowered its rating on Digital's senior
 debt to Single-A-Minus from Single-A-Plus and commericial paper to A-1 from
 A-1-Plus.  About $1 billion of debt is affected.  According to the ratings
 agency, "The downgrade reflects S&P's assessment that DEC's profitability will
 not return to historical levels and will continue to be pressured over the
 intermediate term.
    ________________________________________________________________________
    I guess, this is one of the reasons that DEC wants to be able to issue
    Preferred Stock.

    Preferred Stock is a stock that pays a fixed dividend and has claim to
    assets of a corporation ahead of common stockholders in event of
    liquidation.  Preferred stock is sometimes called preference stock. 
    Bank depositors have priority of claim over even preferred
    stockholders.  Banks and bank holding companies have issued several
    classes of preferred stock, including perpetual preferred stock, which
    has no stated maturity date and is not redeemable by the holder; and
    limited life preferred stock, or preferred stock with a stated maturity
    of at least 25 years.
    
    Common stock, on the other hand, is a security that represents equity
    ownership in a corporation.  Holders of common stock have the right to
    elect directors and collect dividends.
    
    Bottom line is .... common stock claims are subordinate to:
    
    	bondholder claims
    	preferred stockholders
    	and general creditors
    
    I agree, vote NO to preferred if you still want the right to elect
    directors.

What surprised me was receiving this memo. Unless I misread it each
year (a strong possibility), if we don't return the proxy card
it is automatically assumed to be a yes vote. If this is what
the SLT desires, wouldn't a small return rate be in their favor?

re .35

If you don't return the proxy, your shares will not be voted, unless you
attend the meeting and vote them yourself.

--RS

P.S. I returned my NO vote even before I read this string. I don't like complex
financial deals. The existence of preferred stock would make it virtually
impossible for me as an individual stockholder to form an independent judgement
about the actual value of my common stock shares.

    
    Considering this from a purely investment standpoint, why would 
    holders of common stock want to vote FOR this?  Essentially, what's in
    it for them?  
    
    Would they be potentially surrendering rights/value for nothing in return?
    
    Does it make sense to move ones self further down the totum pole
    should the worst happen?
    

    re: several negative opinions
    
    I just pulled out my proxy mailing after readin the last several
    replies. I saw nothing alarming enough not to trust the BOD in
    acquiring the right to issue Preferred Stock (they didn't say that they
    were...just the right). Overall, I believe the stated purposes for this
    flexability are reasonable. 
    
    I don't want my employer or the corporation that I have invested in to
    be too weak to address the elongated business slowdown and I certaintly
    vote to give the Corporation the flexability to resist a hostile
    takeover should that ever be attempted. After all, my paycheck provides
    much more liquid capital than my stock for a much (hopefully) longer
    period. 
    
    Let's just let the current BOD and Senior Management do what it has to
    do and give them the latitude to do in order to turn this company
    around. If it appears that they are incapable of doing this, sell your
    stock at the earliest opportunity. Isn't that what the non-employee
    stockholders do?
    

    
    Hostile takeover???  Wasn't something voted on last year or earlier
    concerning anti-hostile takeover measures?  
    
    Why does it need to be Preferred stock instead of Common stock?  Given the
    statements in the Proxy Statement, the Board could give the Preferred
    stockholders preferential treatment with regards to dividends and
    dissolution/liquidation.  If either of these happens then Common
    stockholders have sacrificed potential future payouts for nothing in
    return.  Is this an incorrect evaluation?
    

    
    RE: "elongated business slowdow"?  
    
    
    That's a $1,000,000,000 saying.
    
    
    
    Mike

    imho
    
    with the common stock price hovering +/- book value with little future
    reason for it to go much higher,
    and with the downgrading of our debt,
    I figure this is another way of raising cash,
    however, with potentially more impact to the common shareholders
    than the debt holders, 
    and being a common shareholder, I'm concerned.
    
    Mark
    

    I guess one of my concern's is that we are giving them the right to
    determine the scope of the preferred stock.   In that they could issue,
    effectivly, a voting dividend bearing security and avoide paying
    dividends on the common stock.
    
    It does seem to say that the voting ability, if issued, would be
    limited to one vote per share, in other words equivalent to common,
    with:
    		- preferential treatment if they break up the corporation
    		- a dividend
    		- receiving this without further consent of the common
    		  shareholders
    
    It's the last bullet that worries me.   I don't mind the idea of
    preferred stock particularly, if we need to raise money.  But remember
    that we took the original debt credit line "just in case" also.
    

    
    I guess I would have had no problem with this had it been in effect
    when I purchased common stock.  I would have known my shares would be
    subordinate to the preferred stock holders and I believe the price of
    my shares would have reflected that position.  When preferred stock is
    issued, I would expect the common stock price to decline based on the
    new reality of subordination.  That decline in price will be reflected
    in the higher price Digital will be able to sell the preferred stock
    for, correct?  After all, preferred stock will have privileges that are
    worth money and I would expect the company to price the stock
    accordingly.
    
    What I'm wondering is, isn't the issuance of preferred stock at this
    point in time a way for the company to get more money (difference
    between preferred stock price and common stock price) at the expense of
    the common shareholders?  If this is the case, then my next question is
    "Haven't we suffered enough?".
    
    Again, correct me if I'm wrong or making incorrect assumptions.  From a
    common stockholders perspective, I see absolutely nothing to make want
    to vote for this measure.
    

    It is not unusual for the preferred stockholders to be able to elect
    their own boardmember to represent their interests.  Common shareholders
    would not be able to vote (their common stock) for such a seat.
    
      John

To all those concerned about diminished ownership in the company; if the 
BOD determines that they need cash, then they can approve borrowing without 
your vote, and they lose a great deal of control on paying that back.  If 
you do not trust the BOD you should NOT own stock in the company.  Loans, 
whether long or short term, are much more onerous to the owners 
(stockholders) than creating more partial owners imho.  After all, 
preferred stock dividends can be held and paid later.  When you do that to 
a loan you are nominally in default.

I would assume that everyone who distrusts the BOD also votes against the 
corporte slate?  I have not gotten my prospectus yet, so I don't know who 
is up for election.  When I I don't trust the financial acumen of the 
BOD I don't hold the stock.  Why do you?

Matt

    Well, my manager trusts my technical acumen, but he still makes me tell
    him exactly what I'm planning to do and why.  If I wanted to add a
    potentially costly feature to a product, and I told him it was because 
    I want flexibility, though I don't have any plans to actually make use
    of it, I know what his answer would be!  
    
    And anyway, I figure that if it's something the stockholders have to
    vote on before the Board can do it, then the stockholders should decide
    whether they think it's a good idea -- NOT simply vote yes because the
    Board says "trust me".  Indeed, I take that attitude toward all elections.
    I'd be much happier if they had said what they want to use this for.
    
    		Larry

    
    Key philosophy in investing is to:
    
    	"Not risk more than you can afford to lose".
    
    This seems like sound advice to me - independent of what 
                company you invest in.
    
    
    

    
    One thing overlooked in this discussion is the fact that BOD already
    has the authority to issue additional common shares. If BOD is forced
    to raise cash by issuing additional common stock it will dilute both 
    the book value and the stock price. I believe the authorized shares 
    number is 250 million while current issued is about 125 million.

    	As a stockholder, if I see that the preferred (if I bought it)
    	gave me greater advantages over my common, or if the preferred
    	diminished my benefits as a common stock holder, I'd trade in
    	my common for preferred.

    Re: .51; "I'd trade in my common for preferred"
    
    Well, that's assuming you could do that.  I don't know what the SEC
    regulations are with regards to new stock issues in a publically-traded
    company; I only know that at a privately-held startup I was at a
    few years back, the preferred stock was privately placed and you
    couldn't get your mitts on it except under rare circumstances (e.g.
    CEO sacked; his preferred went up for grabs by the worker bees).
    
    If DEC offers preferred stock, do they have to offer it to everybody?
    
    Personally, I'm against the idea, and I voted against it on my proxy, 
    primarily because the shenanigans that went on at the above-mentioned 
    startup left a VERY bad taste in my mouth... It'll pass, no doubt, but
    I don't want it to be unanimous 8-)
    
    --jim

    Well I see our "common" stock keeps going down, 36-3/4 yesterday.  Is
    that because the word is out about preferred stock (maybe) being
    issued?  If preferred stock will make my common stock of less value, 
    then I don't want it, unless I can trade my common for preferred.
    

I didn't read all 53 replies, so excuse me if this was already talked about...

Isn't part of our stock problem the fact that certain large institutional 
investors are required by their charter to only invest in stocks that offer a
dividend, hence precluded from buying Digital common stock.

Seems to me that if I wanted to court these institutional investors, and didn't
feel that my profit line was stable enough to offer a dividend on my common
stock, I might consider creating a preferred stock that pays dividends as a 
way to meet that requirement.

Just speculating...

Bob

My prospectus finally arrived on Friday, and I see why some readers are 
upset.  It surely is written poorly.  Looks like a finance write-up with 
legal review and no common sense review following that.  Unfortunately, 
this is rather common in all the prospectuses I read.

I am still going to vote for it as I see no reason to limit the BOD to
methods of raising capital that are more onerous.  While our Debt ratio is very 
low currently, I see that the BOD prefers to not use debt.  I like the idea 
that more people can buy into the equity and if offering an alternative can 
help do that then all the better.

re .54
Yes there are many funds that are not allowed to purchase stocks without 
dividends, and even more pension funds where the amount of return is 
managed for both income and growth.  We are often under represented in 
these as well.

I still feel that people holding stock without any faith that the BOD has 
their best interests at heart should sell imediately.

Matt

    Perhaps the BOD's discussion about pf stock was begun to make Digital more
    attractive to incoming senior management candidates. A current contributor
    of VP's to Digital, which has a three letter acronym, offers pf stock. 
    I wonder if the pf stock offering, if passed, will be available on a 
    some-what limited basis.
    
    	fred deady

LIVE WIRE          U.S. News

DIGITAL SEEKING SHAREHOLDER AUTHORIZATION OF PREFERRED STOCK 

	(Editor's Note:  At the Nov. 4 Annual Meeting, Digital shareholders 
  will vote on a proposal to grant Digital's Board of Directors the 
  authority to issue preferred stock.  In the following article, Ilene 
  Jacobs, vice president and treasurer, answers some questions about the 
  proposal.)

	Q.  What is preferred stock?

	A.  Preferred stock is a type of stock that can have many 
            different features.  It is called "preferred" stock because 
            its holders are "preferred" over the holders of common 
            stock with respect to dividends, liquidation and other 
            rights.  There are many different forms of preferred stock, 
            each with different terms and conditions.  For instance, 
            "straight preferred stock" is issuable in any denomination, 
            for example $10 per share or $100 per share and, unlike 
            common stock, generally has no voting power.  It pays a 
            fixed dividend, generally expressed as a percentage of its 
            per share amount.  This type of preferred stock looks like 
            debt because the dividend is similar to the coupon or 
            interest rate on a bond.

	    There are other types of preferred stock, including 
            preferred stock that could be convertible to common stock.  
            In fact, there are so many variations of preferred stock 
            that there is no one specific definition.

	Q.  Why does Digital need the flexibility to issue preferred 
            stock?

	A.  Issuing preferred stock is a potentially attractive way to 
            raise capital for the corporation.  Although Digital has 
            many options available to raise capital, one option that 
            has never been available to the corporation is the issuance 
            of preferred stock.  Most of the largest U.S. industrial 
            companies have authorization to issue preferred stock.  If 
            shareholders approve the proposal, Digital will have 
            another important financing alternative available to it 
            should it need funds in the future.

	Q.  If approved by shareholders, does Digital intend to issue 
            preferred stock?

	A.  As stated in Digital's proxy statement, Digital has no 
            present intention to issue preferred stock.

	Q.  Is this a management compensation proposal?

	A.  No. Preferred stock will not be used for management 
            compensation purposes.  As stated in the proxy statement, 
            the Board of Directors and management of the company 
            are seeking authorization of preferred stock solely for
	    future financing flexibility.

	Q.  If Digital issued preferred stock, what would be the 
            specific terms and conditions?

	A.  Digital has no current intention of issuing preferred 
            stock.  Terms and conditions are determined at the time the 
            preferred stock is issued.  The terms and conditions are 
            specified by the Board of Directors and filed with the 
            Massachusetts Secretary of State.  If the stock were 
            publicly offered, the terms would be described in a 
            "prospectus" that is filed with the U.S. Securities and 
            Exchange Commission.

	Q.  Under what conditions might Digital issue preferred stock?

	A.  If there were a need to raise capital, Digital might choose 
            to issue preferred stock.  Depending on the company's 
            financial circumstances and market conditions, preferred 
            stock could be a more attractive way to raise capital then 
            debt or common equity.  

	Q.  Do you expect shareholders to approve the proposal?

	A.  As a Massachusetts corporation, Digital is required to 
            receive an affirmative vote of two-thirds of all 
            outstanding shares to pass the proposal, not just a simple 
            majority; therefore, it may be difficult to get shareholder 
            approval.  For example, if 80% of all shares were voted and 
            80% of those shares voted affirmatively, this would be an 
            affirmative vote of 64% of all outstanding shares, which 
            would not be enough to pass the proposal.  As with any 
            proposal requiring such a two-thirds vote, the real 
            challenge is getting all categories of shareholders to vote.  

    
    Surely, People are missing the boat about all this.
    
    Digital is not going to go bust overnight, there is no need to worry
    about what has priority over what on liquidation. Leave that aside for
    a while.
    
    Preffered stock does not reflect the value of a company like common
    stock does. So therefore, if digital starts making huge profits, common
    stock value will rise corespondingly, preffered stock will only go up
    or down in relation to the percentage of dividend that is paid on it.
    ie it will fluctuate markedly less than the common stock.
    
    If Digital wants to borrow money, and it goes to the banks, they will
    still have priority come a liquidation. If Digital goes down the
    preferred stock route, it will give the company extra flexibility as to
    where it gets it's cash from, depending on the markets rates at the
    time.
    Also, as someone pointed out earlier, Digital can sell more common
    stock to get some cash. Our company does not view this with relish,
    simply because our shares are currently undervalued. This is plain
    common sense. The time to do this is when the shares are running high
    and not low, unless your in DEEP trouble.
    
    Over 66% of shareholders need to vote yes for this to get passed. A
    simple majority will not be enough. So, considering voter apathy, this
    would seem to be a difficult objective to achieve.
    
    I am sure of my facts, but no doubt someone will pull me up if I have
    got anything wrong.
    
    Max.
    

As someone with 70 shares of common bought in the $70+ range, why would I
further want to reduce my value by allowing a stock with better benefits?
Great for Digital but not for us holding the current stock.  If they offered a
trade in, that would probably be worth taking.

They're really gung ho over getting out the vote.  I have DEC stock in the
street name of two brokers, and I received a friendly reminder that I should
vote from both of them.  Of course, DEC is paying for these additional
reminders.

re: .58?

I'm one of those who must have missed the boat.
I maintain that the Board of Directors is ultimately responsible for
the loss of equity of my stock.  (If they can fire the president and
founder of this company, they can fire anybody.)
Let them do something about restoring the value of the common stock.

This preferred stock thing is just a loan scam designed to line some
pockets while delaying the inevitable.


        

    I too got the reminder from my broker to vote this time. So I sent in
    my NO vote on Preferred again.
    
    Dave

    
    re: .61,
    
    >This preferred stock thing is just a loan scam designed to line some
    >pockets while delaying the inevitable.
    
    Line whose pockets and delay the inevitable what??
    
    IT IS JUST A WAY OF BORROWING MONEY!!!
    
    Better have this option, than go cap in hand to the banks.
    
    The prefferred and common stocks are completely different animals.
    
    Buying preffered stock is eqivelent to putting your money into a
    savings account. You get regular interest (dividends) with the
    underlying capital value remaining the same ( prefferred, slight
    movement in value). 
    
    For the people who have signaled a prefferance to swap shares, do you
    realize this?
    If so, then sell your common stock now and put it into bonds or
    something similar.
    
    Max.
    

    Note that preferred stock gets a dividend whether the company makes
    money or not.
    
    ########################################################################
    
From:	MR4DEC::EXPAT::VNS "The VOGON News Service  28-Oct-1993 0510" 28-OCT-1993 05:39:46.68
To:	VNS-Distribution
CC:	
Subj:	VNS #2945  Thu 28-Oct-1993

<><><><><><><><>  T h e   V O G O N   N e w s   S e r v i c e  <><><><><><><><>

 Edition : 2945             Thursday 28-Oct-1993            Circulation :  6541 

Fiscal News - IBM, Data General, Microsoft, Compaq
 IBM - Trims losses in 3rd quarter
	{The Boston Globe, 27-Oct-93, p. 41}
>>   IBM said it lost $80 million in the 3rd quarter, after paying 
>>   $22 million in preferred stock dividends.  The loss was far less 
 than the $2.78 billion
 deficit posted last year, but it was roughly in line with estimates that
 called for anywhere from breakeven to a loss of $250 million.  Sales edged up
 to $14.74 billion from $14.70 billion.  Despite cost reductions that have
 included 41,000 job cuts in the year ending Sept. 30, IBM warned there were
 still problems ahead.  "Although IBM's expenses have been falling
 significantly, the company's cost and expense structure remains
 uncompetitive," chairman and CEO Louis Gerstner said in a statement.  Chief
 financial officer Jerome York said expenses for 1993 will be trimmed by a
 total of 10% on a year-over-year basis, if not a little more.  IBM plans to
 trim $7 billion in costs by 1995, with about $2.5 billion this year and the
 remained in 1995.  "IBM can return to profitability with continued reductions
 in costs and expenses, as our gross margins increasingly match those of the
 rest of our industry," Gerstner said.  He said although IBM's overall results 
 remain unsatisfactory, the 3rd quarter included some "encouraging signs."
 "Our business in the United States improved and, while Asia and Europe
 remained difficult business environments, some countries showed positive
 signs," he said.  "Revenue from our person computer and services businesses
 grew strongly and we continued to make excellent progress in reducing overall
 expenses."  Overall hardware revenues fell 1% to $7.0 billion, vs. $7.8
 billion a year ago [sic - TT].  IBM said hardware sales from its large and
 midrange systems declined.  Revenues from all other sources increased 1.5% to
 $7.8 billion, from $7.8 billion in the 1992 period.  York said the PC business
 is booming, with sales expected to double in the 4th quarter from the 3rd.
 But extreme price pressures in the hotly competitive business are expected to
 keep margins tight.  Gross profit margins are also expected to keep falling in
 mainframes and in the AS/400 minicomputer business.  "High-end margins will
 continue to creep downward," York said.  "AS/400 will continue to creep
 downward."  In a sign of the company's shifting business emphasis, service
 revenues were $2.3 billion, up 26.5% from a year ago.  Revenues from software,
 maintenance, rentals and financing declined.  IBM said gross margins in
 services declined as a result of continued investments in the services
 business and expenditures associated with higher product volumes, primarily in
 PCs.  As of Sept. 30, IBM's work force totaled 267,000, down 41,000 from a
 year earlier.

re .64
>    Note that preferred stock gets a dividend whether the company makes
>    money or not.
    
>    ########################################################################
>    
>From:	MR4DEC::EXPAT::VNS "The VOGON News Service  28-Oct-1993 0510" 28-OCT-1993 05:39:46.68
>To:	VNS-Distribution
>CC:	
>Subj:	VNS #2945  Thu 28-Oct-1993>

><><><><><><><><>  T h e   V O G O N   N e w s   S e r v i c e  <><><><><><><><>

 >Edition : 2945             Thursday 28-Oct-1993            Circulation :  6541 
>
>Fiscal News - IBM, Data General, Microsoft, Compaq
> IBM - Trims losses in 3rd quarter
>	{The Boston Globe, 27-Oct-93, p. 41}
>>   IBM said it lost $80 million in the 3rd quarter, after paying 
>>   $22 million in preferred stock dividends.  The loss was far less 
 

Mr Sherman,

You know darn well from your business classes that you mentioned earlier 
that the company can hold off paying preferred dividends at any time.  that 
is one of the benefits to the company.  They must back pay the preferred 
dividends prior to paying common dividends.  Please do not intentionally 
mislead readers.

Vote no if you want, but think about forcing the company to borrow or dilute 
your holdings as the only alternative.  If they offer preferred they 
control the payment schedule, if they borrow they do not.  Very simple.  
Preferred is an option that I hope the company can take advantage of so 
that we do not have to depend on only two sources of capital, more common 
shares and loans.

Matt

    re .65:
    
    Well, if they *can* hold off paying dividends, why didn't they?
    I think the point is that if Digital issues preferred stock, we
    have to understand that Digital may indeed pay a dividend on that
    stock, regardless of how many employees are being laid off to
    save money.  They may also keep increasing the ratio of VPs to
    workers, but we don't get to vote on that one.
    
    The borrowing money argument leaves me cold.  Our problem is not
    lack of cash -- our problem is lack of revenue, which leads potential
    customers to hold back from embracing Alpha and other DEC(not tm)
    products.  From the numbers that I've seen, I believe that we have
    enough cash on hand to hold us until we either start making money
    again or until it's clear that we won't make it.  In the former case,
    we don't need preferred stock, and in the latter case, preferred stock
    would only take away assets from the regular stockholders.  This may
    be a good deal for Digital's top officers but I don't beleive that it
    is a good deal for the regular stockholders or Digital as a whole.
    
    	Larry

    > Well, if they *can* hold off paying dividends, why didn't they?
    > I think the point is that if Digital issues preferred stock, we
    > have to understand that Digital may indeed pay a dividend on that
    > stock, regardless of how many employees are being laid off to
    > save money...
    
    I always thought Americans understood stocks and shares. I was obviously
    wrong.
    
    Who on earth is going to lend money and not expect a return on it? If
    you know the answer, please let me know their details, I could do with
    some money right now.
    
    Brighter and more highly paid people than us have chosen to go the
    "preferred" route. They should also have a greater financial awareness
    than the likes of us. I know that does not entitle them to be "right",
    but it points the way.
    
    We do not know what is being planned that the cash could be needed for,
    but having this facility to borrow will help that planning.
    
    Put it this way. How many people save up to buy a car? How many people
    buy on credit? If you buy on credit, would you expect just to pay back
    what you borrowed. If you expect to pay interest on the loan, would the
    timing of the payments be up to you to decide.
    
    I do not think that it is up to us to say that we have enough cash
    etc... I do not think that attitude gets you anywhere.
    
    Max.
    
    P.S. excuse the rambling style.
    

    
        RE .67
    
        Understanding stocks and shares:  seems like there are two ways 
        to get some return - dividends and selling shares.  Digital's 
        never paid dividends yet people bought its stock, so I think they 
        were expecting the latter.  Dividends are not necessary.  That's 
        not hard to understand, whether you're American or not.
    
        Brighter and more highly paid people:  yup, I'll agree that they're 
        more highly paid.  But, if these brighter folks were trying to 
        persuade us that preferred stock is good for the company, they might 
        have offered a good explanation to us dummies.  The notes and letter 
        that went out to the community was remarkably content-free on 
        explanation.  Most of us have stopped following leaders of any 
        persuasion blindly.
    
    
        Peter

    Does anyone know if this got the required number of share votes?
    
    			Alfred

Re: .69

Yes, it did.

		Steve

Re: .70

Thanks for the info - I just sold all my stock.

Bob Lyon

    Of course it passed.  Most stockholders seem to reason as .67 does:
    management is paid a lot so they must know what they are doing.
    I'm not saying whether they do or don't -- I'm saying that I don't 
    think most stockholders question this credo.
    
    Note, FYI, that .67 doesn't contradict my point that we should 
    expect that preferred stock will in fact pay dividends, regardless
    of the financial state of the company.  In fact, .67 agrees with
    me on that.  So I guess I understand more about shares than he said!
    
    		Enjoy,
    		Larry

    Well if it passed...do we get common or preferred from the ESPP
    this time?
    

    ESPP is based on Common stock.  There would need to be another plan to
    allow purchase of preferedr stock.
    
    Be that as it may, first we need to ISSUE preferred.  All we have now
    is that they MAY issue preferred stock to raise money at any time in
    the future.
    

Boston Globe "Business Briefs" 22-March-1994
-------------------------------------------------------
DIGITAL SLASHES OFFERING BY 20%
Digital Equipment Corp., the nation's second largest computer maker, sold 
$400 million shares of preferred stock, reducing the amount it planned to 
sell by 20% as investors balked at buying new stocks and bonds.  The 
Maynard-based company sold 16 million shares priced at $25 each with a 
dividend yield of 8_7/8 percent through underwriters led by Lehman Brothers 
Inc.  The company planned to sell 20 million shares or $500 milion worth of 
preferred stock. "We were just glad to sell 16 million shares in a very 
difficult market," said Jim Chiafery, a spokesman for Digital. (Bloomberg)

	My Questions to Investor Services...	

	o How does yesterday's preferred stock issue affect the potential
	  value of my common stocks? It would seem to me that in a time when	
	  Digital's stock has been falling and/or flat for some time that a	
  	  guaranteed payment of ~$2.22 per year per preferred share would
	  distract from our earnings & impact my common stock value negatively.	
	
	o Do preferred stock holders have more rights versus common stock
	  holders in any liquidation procedures of the company's assets?

	o Is there any plan that would allow common shares to be converted to
 	  preferred shares?

	o Is there any plan that would allow employees to choose to purchase 
	  preferred stock via ESOP instead of common stock?
	
	  Sincerely Concerned Employee & Common Stockholder!

    ...because existing stockholders were assured this was a GOOD thing
    just before the last AGM.

	Wow, 6 months for no plan to issue to actually issuing. Guess the
	company can move fast when it wants to.

			Alfred

    Nah, they just issued the stocks without having planned
    when, why, or how many.
    

04/20/94--Computer Industry News - FOR INTERNAL USE ONLY
(c) Dow Jones News Service
              
DIGITAL FACES HOLDERS' SUIT

             BOSTON -- Holders of Digital Equipment Corp. preferred shares
          sued the computer maker in federal court, saying they were misled
          into investing in the issue only weeks before a huge loss was
          announced.
             While shareholder suits following a decline in a company's stock
          price are common, the two filed yesterday could prove embarrassing
          because they suggest that Digital hurried the issue into the market.

    
    I was wondering about this. Didn't someone previously note
    that the preferred were on the market in a remarkably short time 
    after the issue was approved?

    Looks like someone at IBM thinks that the preferred stock idea is a
    pretty good one. From this morning's news wire:
    
    IBM WILL OFFER PREFERRED STOCK FOR THE FIRST TIME --- BY LAURIE HAYS
    STAFF REPORTER OF THE WALL STREET JOURNAL
    
    International Business Machines Corp. said it will offer its first
    preferred stock ever, a $750 million issue as part of a plan to sell up
    to $3 billion of long-term debt and preferred stock during the next
    nine to 12 months.
                 
    In a statement filed with the Securities and Exchange Commission, IBM
    said it will use proceeds from the preferred stock and debt offerings
    for "a variety of general corporate purposes."