Conference 7.286::digital

    Having $14B in printer business certainly helps HP grease the sales
    channels for other products (like Pavillon PCs).  We simply don't
    have anything equivalent in the consumer channel, and cannot
    compete at the same level.  The channels we do have are in the
    commercial side, and that's where the sales emphasis is now.  I,
    too, liked seeing the PR we got from the Starion adds, but I can't
    say that I like the write-off we just took to cover the financial
    loss of that "gamble".  
    
    Two things I hope we've learned...
    1) we need to forcast better - don't place unrealistic demands on our
       VPs so that they make irrational decisions (like stocking up on
       inventory which they can't sell - especially in a volatile market
       like consumer PCs.)
    2) Make sure we are still taking the risks in our R&D department so
       that we can come up with the next multi-billion $$ business (like
       HP's printer business or Crysler's minivan or Netscape).
    
    mark

    Digital is not HP nor is HP -  Digital.
    
    We already have "BRAND" recognition in the commercial space - WE HAVE
    HAD THIS SINCE 50-60'S - its the space that generates revenue and profit
    unlike Digitals PC biz.  
    
    I have always thought that we make great products (PCs included although we 
    seemed to be behind the tech curve alot of times).  
    
    The retail marketing channels HP developed is where they have it
    over us.   In addition the margin just is not there.   Why should
    we stay in business that is losing money when there are so many
    areas that Digital needs to expoit that make money?   WE SHOULD 
    NOT - WE SHOULD MOVE ON AND MAKE OUR OWN NICHES...
    
    There seems to be a mentality that PCs are everything these days - 
    this is not the complete truth - there are still alot of opportunities
    in VR, On demand vid, networking, software, high end systems, OpenVMS, UNIX 
    (NCs?), wireless,  etc etc.. that can make Digital alot of money if we 
    play our cards right.
    
    The bottom line is that Digitals bottom like cannot stand losses in the 
    millions "just to be in the PC business".  

    BTW Digital is the 5th largest PC seller in the UK, that's without ever
    selling home PCs.
    
    Congrats to all in the UK PCBU.

    
    .. and when HP gave their recent profits warning, they said it affected
    every product line except PCs. Maybe the haven't got used to activity
    based costing yet though..
    
    and yes, applause for the UK PC guys who actually implemented the whole
    piece pretty well it appears. Shame about most of the rest of the
    planet though. (come visit, and listen)

    G'day,
    
    ... and Australia is now #3 or 4 here (coming up from 10) and has grown
    something like 80% in the last 12 months in PCs...
    
    so the UK, you are not alone!
    
    congrats all round
    Dj
    

G'Day,

	Well said Derek.  Not only we are growing at that rate but we are also
profitable.  We easily exceeded our profit budget for FY96.  We just can't make
enough money to make up for what the rest of the world is losing!

	The business is run a little differently in Australia to the rest of the
world.  *NO* inventory in the sales channels, therefore none of this price
protection crap that I keep reading about.  This means that we have to be able
to turn orders around very quickly which we are obviously doing having just won
the Australian Personal Computer magazine Service and Reliability Award for 1996
(we also won in 1994 and came 2nd last year).

David.

    Well done Australia!
    
    
    So Pc's can be done well, and profitably for Digital, as proven in
    Australia and the UK (and probably other areas).
    
    So if the rest of the company sorts that out, and Alpha growth
    continues, the stock might recover!

    Hmm....
    
    so if we can 'do' PCs in UK, and in Australia, it suggests that there
    is no fundamental reason why we can't succeed. All down to
    implementation (wow!). Also suggests that 'help' is what is needed,
    rather than brutal surgery...
    
    

    I must admit that I was quite surprised on a recent visit to Australia
    and New Zealand.   Digital ads featured prominently on Page 1 and Page
    3 of the national daily newspapers - not big ads, but consistent -
    alongside those of HP and Toshiba.
    
    Seems to me they were placed by the channel partners rather than
    Digital directly - maybe that's the secret.
    
    Also in the New Zealand Saturday editions (or other days in Australia
    when the papers run a special technology section) - there were very nice
    pseudo-article/review type ads promoting Digital PC configs as best
    buy for your $.  Real retail style ($1999.99) pricing and lots of
    sales gimmicks to keep up with the competition 
    
    Indeed - well done.

    On my way home last night I saw (for the first time ever) a billboard
    with a Digital ad.  It was our Hinote Ultra in an inter-office envolope
    ad that I had also seen in a couple of magazines.  The Billboard is
    located so you see it going into Boston on the Mass Pike.
    
    -Bruce 

    Something HP has done differently (IMHO) is in the way they deal in
    "non-core" business. You could say that their non-core business is
    printers. They chose to use them as leverage into the retail space
    (name recognition) without aggressive profit requirements. Printers are
    why so many people buy their PC's. People trust the HP name on the PC
    because the HP printer has been a benchmark.
    
    Digital chose to view non-core business as a liability and shed it.
    I'm not saying it was the wrong decision, but we finally had
    compettitive (price and performance) storage products that were gaining
    acceptance; promoting the Digital name as "open".
    
    Unfortunately the name on the storage product is not as visible to
    "Joe" buyer as the printer that he feeds each day.
    
    Bottom line - core business should generate profit. Non-core business
    MAY be used to leverage other core business without a profit metric
    beyond break even (some losses may be tolerated).
    
    Rob.
    
    re: Advertising in Oz
    Great. You've let the cat out of the bag.
    Now corporate will either...
    a) ...use the Oz model to improve our PC rankings in US/CAN as well.
    b) ...shut down the OZ model as "unnecessary" expense.
    Pick one.
    
    8^)
    
    

    Not to take any of the accolades away from our UK and Aussie
    counterparts, but a recent industry article I saw (PC Week?) listed
    Digital as the #5 vendor in high-end Intel servers.  This is likely the
    sweet spot as far as profitability in the market, although it doesn't
    have anywhere near the volume of the low-end.
    
    On a decidedly different note, the last message on the Ultra billboard
    reminded me of something I heard at a recent industry show, from a
    Digital PC person.  He stated that we will have only 6,500 high-end
    Ultra II notebooks (the upper end, not the HiNote VP.)  He also stated
    you basically "would not be able to get upper end Ultra II's for your
    customers."  Since virtually everyone at the show who expressed a
    desire in our laptops wanted the upper-end, I can see some bad press
    coming our way as far as lack of availability.  We have had two years
    of good press on this product - we couldn't find any source to make
    them in quantity?  I hope someone is being called on the carpet for
    this one, if true.
    
    Chuck

    
    
    re: .12 
    
    #5 in Intel Servers is pretty good considering there are only
    a handful of players in this space.
    
    Compaq
    IBM
    HP
    
    ....are the top three.
    
    Tough group to crack into, but we need to do mcuh better if we have
    a chance to succeed.
    
    gb
    

Last memo I received from Canadian upper management is indicated that Canada is
also doing very well in the PC business.  Sorry I don't have numbers.

BTW, I see a lot of Digital advertising in Canadian publications.  It has been the
case for the past 2 years or so.

I get the impression that the whole world is doing well except the U.S.

/Mario

    Back a few note the Australian folks noted they were doing well with
    PC's and part of it was because they dodnt have any inventory so they
    didint have to worry about the price protection.
    
    This is exactly what causes various groups in DEC to claim they are
    'fantastically profitable'. Funny accounting. Sorry, you cannot run a
    business without inventory. Australia's inventory is somewhere, and
    someone else pays the cost of holding it. So they may look profitable,
    but when you look at the WHOLE picture, DEC is not.
    
    I hope someday this company wakes up and stops lying to itself to make
    its various groups feel good about what they do. The ship is
    sinking. All of the groups will sink together. If we listen to the
    individual stories every group is doing well- VMS is generating all the
    revenue, Service is generating all the profit, etc etc.

         I think it's not funny accounting but an attempt to do things on a
    JIT basis. You can't have 6-8 mos of inventory then expect to absorb
    the costs when Dram prices fall through the floor or the price of a 4x
    cdrom drops drastically. The auto industry and a great many other
    industries are thriving on JIT as opposed to stockpiling months of 
    parts and material. Granted it can cut both ways but it's seldom that
    stockpiled parts increase in price. 
    
    
    bob
    

G'Day,

	It was me who mentioned the 'no' inventory.   Of course we (Digital)
have some inventory but it is raw material only and we are meeting our days on
hand goals (<30 days).  High value material that also tends to revalue downwards
very quickly like CPUs and memory is managed even tighter.   We stock NO
finished goods whatsoever.  Our dealers and resellers also have NO finished
goods inventory.  If they do decide to stock a small amount themselves then
there is NO price protection.  The cost of holding what inventory we do have is
taken into account when the nett profit figures are calculated.

	.16 was on the money.  JIT is the answer.  We have a customer promise to
deliver systems within 4 days of receipt of their order.  That's a fully
customized system to their requirements and delivered to them.  This beats the
pants off most of the competition and it is why we are winning a lot of market
share (we are now #4).

	When our resellers sell systems to their customers they simply contact
Digital and we build them and ship direct to the end-user.  The resellers have
faith that we can get them there on-time and configured correctly so there is no
need for them to keep stock.

	It can work and it DOES work!

David.

	This Just in Time stuff isn't working all that greate in the
auto industry ether. Would you wait 4 Months to get the PC you wanted
like I'm doing to get the truck I want??


Vern

re: JIT and the last couple...

I'm absolutely convinced custom builds is the ONLY way to show some 
differentiation and the company that can do it the best will win.  Just because
some automaker in this country can't figure out how to apply JIT to automotive
doesn't mean it can't be done.  Some foreign auto makers actually ship cars to
this country UNPAINTED and with no options, taking order in transit and do the
customization en-route to save time!

Panasonic is building bicycles to custom sizes, send in your body sizes and they
custom cut the tubing.  What about Levy jeans?  They too take your custom order
(sorry men, women only!) and get you your jeans within a week.  guess what?
no inventory!  no returns!  and the customer always gets exactly what they
want (or at least what they ordered).

I know, it ain't the computer industry.  Right?  Wrong!  There are lots of
mail order houses that do custom builds and to it really well.  I see no reason
why we can't either, if we set our minds to it...

-mark

    I actually heard a radio ad last night on a local (Ottawa, Can.)
    station for the Digital service center...and a special on a P100
    Starion 917. [I think it was $2199 cdn.]
    
    r
    

    Re: .18
    >This Just in Time stuff isn't working all that greate in the
    >auto industry ether. Would you wait 4 Months to get the PC you wanted
    >like I'm doing to get the truck I want??
                                             
    I wouldn't blame your 4 month delay on your truck on JIT practices.
    Trucks and jeeps are *extremely* hot items right now.  Most US truck
    and jeep plants are producing at rates that exceed the designed
    capacity of the plant.  The JIT part is working OK (part inventory is
    very low)-- the plants just can't keep up with demand.  The auto
    companies are reluctant to increase capacity, since a downturn in the
    business would them leave them with costly excess capacity (they
    remember their troubles in '70s and '80s).
    

So it appears that you need to speak non-American
English and/or be a member of the Commonwealth
to succeed at Digital in the PC business.....

FWIW, the PCBU appears to be a whipping boy -
the layoffs are in most business units, not centered on the 
PCBU or Europe.

    Bruce Claflin, VP PCBU, was quoted (in either InfoWorld or Information
    Week; I forget): "We're doing great in 98 countries and terrible in 1".
    

    Just to get some balance on the UK situation; desktops are going like
    hot cakes, and we've got 'em to sell, laptops are going like hotcakes,
    but I'd sell my mother to get hold of some port replicators :-).
    
    We aren't making enough PCs! Bruce, make more!

    I am in the strange position of agreeing with Digital upper management.
    I believe spending  resources to hold a position in the home PC
    business is a mistake. It compares to making a push into the color TV
    market in 1964, just before the TV changed from a piece of furniture to
    a commodity based on basic standards. The volume market for TV's moved
    offshore.
    The last piece of "standardization" of the low end PC is the USB. When
    the specifications for this are formalized and the industry has started
    incorporatiing them its time for the low end of the PC market to follow
    the color TV trail. How many TV manufacturers are US companies?
    A Samsung or Sony or Mitsuwhatever can put a CPU, lots of cheap memory,
    a big drive and associated support in a cheap mass produced box and
    sell them CHEAP. Need add-ons? You just plug them into the USB ports.
    Anyone that has ever used a MAC with the Appletalk and SCSI ports is
    familiar with the concept. If it plugs into a MAC port it works, no
    config the switches mess, etc. When this is the case in the WinTel
    world price, low price (read lowlowlow profit) becomes the major
    purchase criteria.
    Focus on the top end. NEC is dropping the MIPs line, PowerPC in the NT
    space isn't even on the radar. Finally there are only two real choices
    for NT, Intel or Alpha, period. On the Intel side, when all other
    manufacturers incorporate either an Intel two or four CPU board, how
    will they differentiate themselves? Our high-end Intel boxes already
    hold their own or outperform the competition.
    If you feel the PC battle is what you want, come to Texas. Compaq is
    hiring, Dell is hiring, and if you want to be on the "other side"
    Samsung is building a plant as fast as they can pour the cement. Zenith
    television was probably hiring in '64.

    
>        The last piece of "standardization" of the low end PC is the USB. When
>    the specifications for this are formalized and the industry has started
>    incorporatiing them its time for the low end of the PC market to follow
>    the color TV trail. How many TV manufacturers are US companies?
>
>    If you feel the PC battle is what you want, come to Texas. Compaq is
>    hiring, Dell is hiring, and if you want to be on the "other side"
>    Samsung is building a plant as fast as they can pour the cement. Zenith
>    television was probably hiring in '64.
    
    I don't buy this argument.  This is not 1964 when a few models were
    mass produced in the far east and shipped by ocean to the US for
    market.  TIME is vital now.  I would expect the movement to be towards PCs
    and TVs being built in the local market (US, EC, AP) vs in cheap labor
    locations.  As soon as someone resumes making tubes and yokes in the US
    TVs and monitors willbe built in the US again.
    
    Greg (whose dream is to start a consumer electronics manufacturing firm 
    in the US to prove it can be done here!)
    
               

re: .25

Just because we *do* lose money on every PC does not mean that we *should*.
That's just a result of poor execution. PC manufacture is all about cost
control, if you can't control your costs on the low end why would you
magically be able to do it on the high end? 


As for Color TV's, you have picked a good example. The exact same thing
happened there, the traditional American/European manufacturers let it
all go to those that did control their costs. These were mostly in the
far east. However, that's not the end of the story - I don't know whether
you have seen all those Corporate Image ads for LG? Lucky Goldstar are
now a $50bn Corporation. What's more they are not just using cheap labor
to get there either, they are about to build a TV factory in Wales.
Compaq, Gwy2k, et al are bleating about how tough the PC market is,
it all comes down to execution.

M
  

        I think we should be looking at PC sales as a peripheral entity to
    solution sales. Sell solutions with accompanying boxes as opposed to
    just selling boxes.

>    I must admit that I was quite surprised on a recent visit to Australia
>    and New Zealand.   Digital ads featured prominently on Page 1 and Page
>    3 of the national daily newspapers - not big ads, but consistent -
>    alongside those of HP and Toshiba

This has been going on now for about 4-6 months, and seems to be working well 
with the "JIT" process of making PC's

Good to hear from you again Chris ...

 >>       I think we should be looking at PC sales as a peripheral entity to
 >>   solution sales. Sell solutions with accompanying boxes as opposed to
 >>   just selling boxes.
    
    careful ! you'll be singing the praises of Software and SI next %^)
    
    Graham

    Lucky Goldstar TV factory in Wales: Wales *is* cheap labour compared to
    very many places, and of course once you're screwdrivering inside the
    EEC it's harder to put up any tariff barriers.