Conference 7.286::digital

(from VTX, amongst other places)
    
         MESSAGES SENT TO ALL EHQ EMPLOYEES
         From: Public Relations - EHQ/Geneva. - Rolf Espen Olsen
         *************************************************************
         
                           DIGITAL EMPLOYEE BRIEFING
         
         Philips Electronics and Digital today announced that the two 
         companies have reached an agreement in principle on the sale 
         of most of Philips' Information Systems Division to Digital.  
         Please find attached the press release we are sending out 
         jointly with Philips today.
         
         Philips and Digital already have a long standing relationship 
         and both companies consider this agreement as a perfect fit.  
         For Digital, the following factors were particularly 
         important:
         
         -  Philips' Informations Systems Division has a good market 
            position with small and medium enterprises specifically in 
            the areas of general business applications, local 
            municipalities, health care, printing and publishing, 
            wholesale and distribution, travel and hotels, etc. 
         
         -  Philips' Informations Systems Division has also a solid 
            market position in providing solutions to financial 
            institutions, specifically front office solutions.  They 
            have more than 150.000 seats installed in 20 of the 
            leading European banks.
            
         -  Philips' Informations Systems Division has a tradition of 
            commitment to standards and open systems.  Several years 
            ago they announced a strong commitment to open systems 
            with UNIX based on Intel and Motorola.  Their strongest 
            focus is on the Intel platform which fits very well with 
            our Intel-based line of products.
            
         -  the culture of Philips fits with ours.
         
         Furthermore, both Digital and Philips see potential 
         cooperation in the areas of multimedia, PC's, components and 
         CD-I (Compact Disk Interactive).
         
         This agreement should be seen as an important element in 
         Digital's efforts to achieve future growth and development in 
         Europe. It will increase Digital's market share, expand our 
         distribution channels and customer base, and also strengthen 
         our system integration capabilities and product offerings.  
         
         This information is also posted in VTX Live Wire.



         
         PRESS RELEASE ISSUED AT 10:30 (A.M.) TODAY
         
         Philips
         Ben H. Geerts, 31 40 75 72 47
         Jack Reemers, 31 40 75 72 67
         
         
         Digital Equipment Corporation
         Rolf Espen Olsen, 41 22 709 4396
         Dallas Kirk, 1 508 493 4562 
         
         July 23, 1991
         
         
         PHILIPS AND DIGITAL AGREE IN PRINCIPLE TO THE TRANSFER OF 
         INFORMATION SYSTEMS ACTIVITIES
         
         
         Philips Electronics and Digital Equipment Corporation today 
         announced that they have reached agreement in principle, 
         subject to consultations with the workers' representatives 
         and the necessary official approvals, on the sale of most of 
         Philips' Information Systems Division to Digital.
         
         The final agreement will cover the Division's activities for 
         financial institutions, small and medium enterprises, image 
         and document management systems, and all related customer 
         service activities. It will not include Dictation Systems and 
         Smart Card, nor the manufacturing activities in Eiserfeld 
         (Germany). The transfer is expected to be completed by 
         October 1, 1991.
         
         Philips president Mr. Jan Timmer commenting on the 
         transaction, said: "This move must be seen in the context of 
         the ongoing rationalisation of the information systems 
         industry. Although the restructuring programme of our 
         Information Systems Division led to considerable improvements 
         of its bottom-line, we are convinced that the longer term 
         interests of our customers and employees are better served 
         with this transfer of activities to the excellent Digital 
         organisation, with which we have had a close relationship for 
         many years. This will allow us to focus our efforts on the 
         Personal Computer sector of the information technology 
         market. The Personal Computer business now forms part of the 
         division for Consumer Electronics products."
         
         							      
         							      
         					      /more......



         
         
         ...../2
         
         
         Mr. Jack Smith, senior vice president, operations for 
         Digital, said: "Today's announcement fits perfectly with our 
         strategy of improving our position in the market for small 
         and medium enterprises, and financial institutions. Philips 
         has a good market position, excellent products and an 
         in-depth knowledge in specific areas of interest to us. 
         Digital's outstanding range of products and the expertise of 
         our people, combined with the specific know-how of Philips, 
         make a perfect match. We are both committed to the world of 
         open systems and international standards, and together we 
         will be able to provide new, additional benefits to customers 
         based on our combined strengths."
         
         Both companies also announced that they had agreed to explore 
         the possibilities for cooperation in a wide range of areas 
         including personal computers, components, CD-I and other 
         multi-media applications that will increase the business 
         potential for both companies.
         
         All employees involved in the information systems activities 
         covered in today's announcement, approximately 7000 people, 
         will transfer from Philips to Digital.
         
         
         Philips Electronics N.V., founded in 1891 and with 
         headquarters in Eindhoven, The Netherlands, is one of the 
         world's largest electronics companies, with sales of USD 30,8 
         billion in 1990 and 262,900 employees worldwide. Its products 
         include lighting, consumer electronics, components, 
         semiconductors, personal computers, communication systems, 
         medical systems, industrial electronics and domestic 
         appliances and personal care products. Its shares are traded 
         on the New York Stock Exchange, The Tokyo Stock Exchange and 
         17 European stock exchanges.
         
         Digital Equipment Corporation, headquartered in Maynard, 
         Massachusetts, is the leading worldwide supplier of networked 
         computer systems, software and services. Digital pioneered 
         and leads the industry in interactive, distributed and 
         multi-vendor computing. Digital and its partners deliver the 
         power to use the best integrated solutions - from desktop to 
         data center - in open information environments.
         
         ENDS

    Just after the recent IBM-Wang agreement, I met a Wang manager who told
    me that Wang had approached Digital first. Perhaps Ken didn't want to
    preside over the layoffs that agreement would have necessitated;
    perhaps this Digital-Philips agreement was close to fruition. It does
    put an interesting spin on the concept of "rightsizing," though.
    
    This agreement seems to strengthen our position vis-a-vis Europe '92.
    We have certification as an open systems vendor, a good basic position
    throughout Europe in vital parts of the IS sector, and, through
    Philips, a credible position in UNIX. What's the recent history of
    Philips's IS division that led to this agreement?

    I wonder what will become of those 7,000 people if they have a few bad
    quarters. I guess we can just resize them.
    
    What is the long term (<13weeks) strategy ? 

    An article on the Philips deal appeared in the 7/19 Wall Street
    Journal, p. B3B.

    Makes perfect sense that in a time when Digital is cutting expenses
    and downsizing that they take on 7000 more employees in Europe....think
    of the savings in salaries, benefits, etc........

    	re .5
    
    	On what do you base that opinion?  Or did you just make a sour
    	reply because that is the trendy thing to do here?
    
    	Sure DEC is laying people off -- because we have more people
    	than we need for the business that we do.  The 7000 people
    	from the new company will not be incorporated into our current
    	business.  They will continue to run the business that they
    	were doing before the acquisition.
    
    	Or are you suggesting that we lay off THEM, and ship 7000 
    	people laid off from Mass sites over to Europe to pick up this
    	new business?
    
    	Joe Oppelt

    DEC Europe _has_earned_ the right to do what it wants with the money it
    earns.  DEC US has not earned the right to criticize the decisions
    they make.

    You probably know that DEC US is smaller the DEC non-US in terms of
    revenue.

    You probably don't know that DEC Europe represents over 500% of the
    total DEC profits on operations.

    Not 50% but 500%, that's easy to do when DEC US has operating losses
    that drag the rest of DEC down.

    So I'd give DEC Europe a lot of discretion to do what it thinks is
    right.
    
    If DEC US decided to do this with Wang, for example, I'd go nuts.

    re .7
    
    BTW, that was a Corporate decision to buy Philips.
    
    Despite I am a European (and German) I do not feel that "we" have
    earned all the profit of the company.
    
    It is always the energy and the spirit of  a l l   DEC employees which
    enables us to take advantage of the specific economic environements in
    the different parts of the world. Europe was lucky to have a strong
    economy over the last FY.
    Next time it might be just the other way round....
    
    joerg

    I was specific in pointing out that DEC US criticism of the DEC Europe
    decision was unfounded.  Perhaps in the next time around, we'll be
    profitable and want to acquire Novell or Banyan.  I'd expect that DEC
    Europe would let us be.  But this time around, DEC Europe ought to
    choose its own destiny without the US second-guessing and moaning about
    its own layoffs
    
    Digital Equipment as reported in Forbes magazine July 22, 1991
    
    1990 rank 20 US multinationals with foreign revenues
    Foreign revenue $mil 7,119
    Total revenue 12,943
    Foreign as % of total 55
    
    Foreign net profit (from continuing operations) $mil 374
    Total net profit 64
    Foreign as % of total 505.4

    Hey, more power to 'em.  Digital Europe has been leading the way for
    several years....and in more than just revenue generation.
    
    I wonder, will this help us in any way to deal with the 1992 situation
    coming up in Europe?

>    What's this about "DEC Europe" and "DEC US"?  When did we split into
>    two (or is it three) different companies?  

	Technically I believe that most [all?] of the subsidiary companies are
	different companies. Perhaps owned by Digital US. I don't know or
	want to know all the details. We have several susidiary companies
	operating in some countries.

>	Mr Sweeney makes it seem that there are people in
>    Europe (and possibly other places) who make decisions without
>    considering the impact on the corporation as a whole.

	Maybe you haven't run into such people but I have. Lots of them.
	Sad but true.

		Alfred

    At the risk of getting back to the subject of the take over:

    I read last week that Phillips IS division has been dripping red
    ink for a while. I remember sometime ago reading that the PC
    group, which was the only part making money, was moved to an
    other division. I hope we got what we got for a good price.

    Possible benefits include increased European presence and
    facilities which should help with the changes in 1992. Also
    an installed customer base. Though I'm not sure what the plan
    is to deal with/support those customers. Are we hoping to migrate
    them to DEC hardware (RISC/VAX/ULTRIX/VMS???) or maintain their
    Phillips kit. Anyone know? 

    One would like to believe we'll hear more detail when the sale is
    final. But I'll be surprised if that happens.

    		Alfred

    I think Mr. Sweeney criticizes those DEC US employees who criticize
    decisions made to expand Digital elsewhere, especially if elsewhere
    is profitable while the US portion of the company is losing money.
    
    I am concerned however about the true facts of where profit is earned
    and loss.  It is very much to the advantage of a multi-national cor-
    poration to shift its income to the least tax jurisdiction.  I have
    seen numerous examples where goods are transfered at a loss between
    parts of a company so that the final profits end up where they will
    be subject to the least taxation.  Since not all of Europe's manufac-
    turing capacity is in Europe, and since other costs which the corpora-
    tions incurs for all of Digital (KO's salary benefits etc... and those
    of a few other DEC officials) may be applied strictly to DEC US, the
    European and GIA profits are probably slightly inflated. The fact
    remains however that these corporate entities seem to be faring much
    better than the US domestic portion of the corporation.
    
    The economy in Europe may have been better than that in the US and
    that may change in the future.  But I suspect the competition and
    pricing pressure in the US will continue and spread to the world as
    open systems and standards drive this industry closer to a commodity
    business.  So we are all likely to find profits shrinking and conti-
    nuous pressure for better performance (ie making do with less).
    
    

    Actually, I'm making the distinction that DEC US is not DEC Corporate.
    What good for DEC US may not be good for DEC Corporate or DEC Europe or
    DEC GIA.  We're a multinational.  That's my point.
    
    Look at the numbers from Forbes that I entered here.  The profitable
    parts of Digital ought to be left alone to make their own business
    decisions.   
    
    Criticism of the decision like 1540.5 is the reason why I entered the
    note to reinforce the idea that DEC US is not DEC, it's only part of
    DEC, and at the moment, not its most profitable part.

    Are there any other ex Burroughs/Sperry people out there beginning to feel
    the shivers running down their spine?
    
    A sense of deja-vu all over again!
    
    Anybody care to tell me the status of "Unisys" (nee Burroughs/Sperry)
    nowadays?
    
    Can anyone else tell me why I shouldn't be worried?
    
    Mike

    re .-1 (Unisys)
    
    From yesterday's belgian main financial newspaper...
      (front page, the second story was DEC-Philips announcement)
    
    
    * Unisys and Apple will terminate thousand of jobs. *
    
    
    Numbers were 10000 for unisys and 2000 for apple
    
    
    
    
   ref: L'echo de la bourse  24/7/1991
    
    
    

re .16:

Unisys is laying off 14% of their employees.

What's the connection with the DEC buyout of Phillips I.S.?  Weren't Burroughs
and Sperry about equal in size?  Didn't they both make hardware, principally
mainframes?  Phillips is mostly in the software services business, no?

    I see from todays FY91 Financial Statement that non-US revenues are
    up to 63% now.  We truly are a multinational, but many U.S. employees
    cannot make that transition mentally.  They also appear not to
    understand that although "we" are a corporation, we are also made up
    of many separate companies, incorporated and operated under the laws
    of their home countries.
    
    Why else would DEC Germany grant six weeks vacation, extra pay at
    Christmas, or have low-level employees on their works councils?

    re .19: Don't know exact percentages, but Philips certainly makes a
    fair amount of hardware too (don't forget the incandescent bulbs :-)
    BTW, it's Philips with one ell...
    
    re .29:
    
    >Why else would DEC Germany grant six weeks vacation, extra pay at
    >Christmas, or have low-level employees on their works councils?
    
    Well, it's not the law, but (workforce) market pressure.. besides, the
    vacation is more like 9.5 weeks).
    
    The Christmas extra pay is a bit bogus - the salary ranges are
    determined on terms of annual salary, which is paid in 13 monthly
    installments, two at the end of November.
    
    But I don't understand your comment about the low-level emplyees in the
    works council????
    

Subject: DEC Wins in Banking after Philips Acquisition 01/03/92
Date: 4 Jan 92 02:13:35 GMT
 
WANCHAI, HONG KONG, 1992 JAN 3 (NB) -- Digital Equipment Asia is
poised for major growth in the regional banking market following
Digital's worldwide acquisition of Philips' Information Systems
Division (ISD) business.
 
As part of a worldwide agreement, some 600 Philips sales and
technical staff in eight Asian countries - China, Hong Kong,
Indonesia, Malaysia, the Philippines, Singapore, Taiwan and Thailand
- will join Digital within the next few months.
 
The acquisition will increase Digital's business in Asia by an
immediate 15 percent, adding around 200 customers mainly in the
retail banking sector.
 
Philips' ISD fits well with Digital's business, product and services
strategy, according to Bobby Choonavala, managing director of Digital
Equipment Asia. The acquisition lays the foundation for continued
strong growth in the financial services market, Choonavala said.
 
"Philips' great strength is in front-end retail banking systems such
as ATMs and teller terminals, which have been identified as strategic
for Digital," he said. "Retail banking is a high growth area and the
increasing popularity of Digital's networked financial and
administrative systems in this sector makes it essential for us to
offer fully integrated solutions to our banking customers."
 
"Philips has a strong customer base among the region's major retail
banks, together with excellent people who have a long track record of
success in systems integration. Philips also brings us a solid
product line that has little or no overlap with existing Digital
products but fits well with our multivendor integration and service
strategies."
 
Choonavala gave an assurance that Digital will take immediate
responsibility for customer service and maintenance in respect of all
the transferred product lines. "Customers will be seeing the same
people and receiving the same service as before, although we except
to improve it by applying Digital standards and controls," he said.
 
The acquisition covers the full range of Philips retail banking
software applications, hardware products and services, including
image and document processing applications, financial transaction
printers, automated teller machines and self-service information
terminals.
 
These products will be integrated with Digital's existing back-office
strengths in banking and networking and standards-compliant Network
Applications Support (NAS) software.
 
"Digital is currently working with more than 2,000 banks worldwide,
has systems operating in 90 per cent of the world's automated
exchanges, and has installed tens of thousands of trading seats,"
said Fred Fung, Digital's Asia region marketing manager for banking
and financial services.
 
"Following the transfer of Philips IS business to Digital, we can now
offer these customers a much wider choice of solutions and
expertise."
 
Choonavala said Digital will absorb all of Philips' ISD staff. The
largest operation is in Thailand, where more than 300 people will
form a new company, Digital Equipment Solution Services (Thailand)
Ltd.
 
This new company, which will focus on systems integration
for the banking and financial sector, will report direct to
the Thailand Country managing director, Philip Curran. Major
customers of Philips' ISD in Thailand include Bangkok Bank,
the country's largest bank.
 
"Philips employees have taken the agreement very well," said
Choonavala. "It has been a friendly transition. The Philips employees
will have a lot to contribute to Digital and our customers."
 
In Hong Kong, Digital will acquire Philips' local engineering and
development team, which scored a notable first in 1989 when it won a
US$3.2 million (HK$25 million) contract to supply self-service
passbook printers for the HongkongBank and Hang Seng Bank. More than
400 of the Customer Operated Passbook Updating Terminal (COPUT)
printers have been installed in branches.
 
Philips has a strong presence in the PRC market, where 350 Philips
ATMs are in use. They are installed at branches of the Industrial and
Commercial Bank of China in more than 16 cities, as well as at
branches of the People's Construction Bank of China.
 
"All the Philips front-end products, such as teller terminals,
passbook printers and ATMs, can be integrated with retail or
wholesale banking solutions from Digital now," noted Fung.
 
"But it will be a priority for us to improve on this capability by
incorporating Philips products into Digital's computer architecture,
so they will become compatible with the Advanced Computing
Environment and will support NAS."
 
Choonavala said reaction from Philips' customers has been very
positive and encouraging. "Most customers appreciate that the
addition of Digital products and services to those of Philips will
widen their choice of banking solutions in the future," he said.
"They also feel confident that Digital has both the resources and the
commitment to modernize and extend the Philips product line."
 
(Norman Wingrove/19920103/Press contact: Walter Cheung, Digital, Tel
+852 861 4850)