Conference 7.286::digital

DEC 61 5/8, change +4 1/8

    The press release was sent out after 4:00, so the +4 1/8 had nothing to
    do with this announcement.
    
    -Bruce

    
.-1>    The press release was sent out after 4:00, so the +4 1/8 had nothing to
.-1>    do with this announcement.
    
    That's what I thought too.  So much the better!? 
    I'll gladly accept an other nice jump tomorrow :-), 
    as I hope to sell some early next (IRS) year.
    
    Hein.
    
    
    
    
    

    This +4 1/8 has probably nothing to do with Cirrus announcement.
    Other computer companies recovered well yesterday (HP +6 1/4 and IBM +2
    7/8) from the steep fall last week, although there still all three
    well below their value of 11-DEC-95
    

    re: .2
    
    If it went out after 4 PM then it must of been 4 PM on the 18th
    because I read the announcement on Livewire before noon yesterday
    the 19th.
    
    
    Robin

	We in DS have been waiting about 20 months for this announcement.  It
	was March of '94 when we first heard there was a deal in the making.
	Since then, the announcement was always "next week" or "next month".
	Last week they started moving trailers in for the construction workers
	to complete the Fab 6 build out.  This is good news because the whole
	deal had become a huge distraction and now we can get on with it and
	produce some revenue ($$$).
						JT

    re: Note 4331.5 by KAOFS::R_DAVEY 
    
> On Livewire well before 4:00 PM 
    
    We in Hudson were told at 4:15 pm yesterday (the 19th) at that time
    Ed Caldwell VP of Digital Semiconductor said the press release went
    out after the market closed.  So LIVEWIRE might have jumped the gun.
    
    -Bruce
    
From:	PONYEX::PONYEX::MRGATE::"NEMTS::SALES::A1::CALDWELL.R E" 20-DEC-1995 11:50:23.98
To:	@Distribution_List
CC:	
Subj:	Press Release                                                          1

From:	NAME: Ed Caldwell                   
	FUNC: Digital Semiconductor           
	TEL: 225-5036                         <CALDWELL.R E@A1@SALES@AKO>
To:     See Below

I am very pleased to announce that we have signed a semiconductor
manufacturing agreement with Cirrus Logic. This agreement allows
us to manage our leading edge semiconductor facility, Fab 6, and 
to realize the benefits of high volume manufacturing while
reducing our semiconductor manufacturing costs.  It also ensures
flexibility for both companies to respond to growing market demand 
for our products.

I would like to thank all of the Digital Semiconductor employees
for their dedication to excellence and for making Fab 6 one of the
world's leading semiconductor fabrication facilities.  As this is not
a joint venture agreement, we will not form a new entity so there will
be no need to move any DS employees.  In fact, we plan to expand and 
add approximately 200 new employees in 1996/early 1997. 

For your information, I've attached the press release that was distributed 
over the PR Newswire and to financial analysts on Tuesday, December 19, 
at 4:15 Eastern Standard Time. 


        
        Nikki Richardson
        (508)493-6369
        Digital Equipment Corporation
        
        Tom Rigoli
        (510)226-2259
        Cirrus Logic, Inc.
        
        
                   DIGITAL AND CIRRUS LOGIC SIGN AGREEMENT
            TO ENTER INTO SEMICONDUCTOR MANUFACTURING RELATIONSHIP
        
        
        MAYNARD, Mass. -- December 19, 1995 -- Digital Equipment 
        Corporation (NYSE:DEC) and Cirrus Logic, Inc. (Nasdaq:CRUS) of 
        Fremont, California today announced that they have completed a 
        memorandum of understanding to enter into a semiconductor 
        manufacturing relationship to produce wafer products at 
        Digital's state-of-the-art Fab 6 facility in Hudson, 
        Massachusetts. 
        
        Under the arrangement, Cirrus Logic will provide approximately 
        $355 million of leased equipment financing and fixed payments 
        to maximize the capacity of Digital's Fab 6 facility. Cirrus 
        Logic will have a take-or-pay contract to purchase wafers 
        manufactured by Digital, primarily using Digital's leading 
        edge, 8-inch CMOS technologies. The contract will have an 
        initial six-year term and will have provisions for renewal. 
        The transaction is subject to execution of definitive 
        agreements and final approval by the Boards of Directors of 
        both companies.
        
        Digital's Chairman Robert B. Palmer commented,"We have 
        evaluated a number of opportunities to optimize our investment 
        in our world-class facility in Hudson and we are very pleased 
        to enter into this agreement with Cirrus Logic. This 
        arrangement will preserve Digital's capacity requirements and 
        provide additional guaranteed capacity for Cirrus Logic. The 
        result will be reduced manufacturing costs for both 
        companies."

                        *****DIGITAL CONFIDENTIAL*****
        
        Page 2
        
        Michael L. Hackworth, president and chief executive officer of 
        Cirrus Logic, noted that the manufacturing agreement with 
        Digital will support his firm's phased expansion program to 
        build a world-class manufacturing infrastructure. "Over the 
        next five years, we intend to build a manufacturing capability 
        to serve the opportunity created by our product and technology 
        investments." 
        
        Digital Equipment Corporation is the world's leader in open 
        client/server solutions from personal computing to integrated 
        worldwide information systems. Digital's scalable Alpha 
        platforms, storage, networking, software and services, 
        together with industry-focused solutions from business 
        partners, help organizations compete and win in today's global 
        marketplace.
        
        Cirrus Logic is a leading manufacturer of advanced integrated 
        circuits for the desktop and portable computing, 
        telecommunications and consumer electronics markets. The 
        company applies its system-level expertise in analog and 
        digital design to innovate highly integrated, software-rich 
        solutions. Cirrus Logic has developed a broad portfolio of 
        products and technologies for applications spanning 
        multimedia, communications, mass storage and data acquisition.
        
        CORP/96/149

    
     What we have excess manufacturing capacity? A second source (domestic)
    for Alpha? We have better...chips?
    
    Hey explain it to me, I be a software kind of guy.....
    
    -Mike Z.

    re: Note 4331.8 by NEWVAX::MZARUDZKI 

    In simple terms,
    
    To Digital Equipment Corporation this means:
    
    We will be able to divide a large number of fixed costs over a much
    larger amount of product. This will allow DS to manufacture and sell
    our parts at a lower cost.  
    
    
    To Cirrus Logic this means: 
    
    They will be get the ability to produce devices they design in Digital's 
    FAB using Digitals manufacturing process. Cirrus will lease equipment 
    that will increase the capacity of the FAB.  They will buy completed
    wafers from Digital.
    
    -Bruce

    
    What type of parts will Cirrus be building in FAB 6?
    
    Jon
    

    Seems like the deal competed after FAB 6 produced it's first working
    wafers.  
    
    Jon

    The LIVEWIRE CIRRUS posting was at 19-DEC-1995 16:14:29.53

RE:4331.9

So I guess this means the SBU and others will soon see significant price 
reductions on Alpha chips?

Maybe now we can more easily offer Intel competitive products at the low-end
of the spectrum.

Ken

re: Note 4331.13 by AKOCOA::kenspc.ako.dec.com::kaminsky 

>So I guess this means the SBU and others will soon see significant price 
>reductions on Alpha chips?

    It will take about 18 months until we get the equipment up and ready to 
    run production material.  So look at FY98 for any price reductions due
    to this deal.  In 2HFY96 and FY97 FAB6 (with all Digital money) will be 
    shipping material that should help bring down the price.

    -Bruce   

I got this in the mail today, and it makes me wonder what the SBU Marketing
folks are smoking... ...someone tell 'em to pass it over here.

Hey, if the customers believe this crap, that's fine by me... but *I* sure as
hell won't lie to someone.


My "rebuttal" is in the next note.

- jeff


------------snip------------
From:	SALES::SALES::MRGATE::"A1::SBUMARKETING" 22-FEB-1996 12:34:04.56
To:	@Distribution_List
CC:	
Subj:	Cirrus: Talking Points for Sales                                       1

From:	NAME: SBU Marketing                  <SBUMARKETING@A1@SALES@AKO>
To:     See Below (Distribution List Truncated)

 From:  Maureen Kenney @MRO, DTN 297-3214
 
                        DIGITAL INTERNAL USE ONLY
 
 This sales flash will help you address customer and partner questions 
 as well as any concerns that may have been raised by our competitors 
 regarding Digital's recent decision to cease negotiations with Cirrus 
 Logic.  
 
 As you know, Digital was working toward a contract with Cirrus Logic 
 whereby Cirrus would provide $355 million in cash and financing to buy 
 equipment for FAB 6 in order to use it to full capacity. 
 
 Digital decided to discontinue negotiations because business conditions 
 have altered for Cirrus Logic recently.  As a result, it is not 
 practical for Digital to continue discussions with Cirrus Logic 
 concerning its investment in FAB 6. 
 
 What you and our customers and partners should understand about this 
 decision is:
 
 	 o  Although this agreement would have been nice to have, 
            Digital's decision to terminate negotiations does NOT have 
            any impact on our ability to afford FAB 6 or Alpha. 
 
 	    Remember: FAB 6 is paid for, and we can well afford to make 
            the retooling changes required for future versions of the 
            Alpha chip.
 
 	 o  Digital's decision to terminate negotiations also does NOT 
            affect Alpha chip design, delivery schedules or build plans 
            for EV56, EV6 or EV7.
 	    
 	 o  Digital anticipated no real financial benefit from any 
            contract which might have been executed between the two 
            companies for at least 2 years. Thus, there is no short term 
            financial impact which results from terminating our 
            discussions with Cirrus Logic.
 
 	 o  Digital will continue discussions with other investors. 
 
 
 Good Selling,
 
 Maureen Kenney
 Channels & Field Communications Manager
 Systems Business Unit
 
Distribution:
This message was delivered to you utilizing the Readers Choice delivery 
services.  You received this message because you are part of the Sales, 
Marketing, or Communications organizations.  If you have questions regarding 
this message, please Maureen Kenney.


To Distribution List:

LINDHOLM@BIGQ@VMSMAIL,
LINNELL@HURON@VMSMAIL,
LINSE@ICS@VMSMAIL,
LIU@DEMING@VMSMAIL,
LOUGHLIN@ROCK@VMSMAIL,
LOUNSBURY@DEMING@VMSMAIL,
LOWE@DEMING@VMSMAIL,
LOWNEY@VSSAD@VMSMAIL,
LSANDERS@CHIPBZ@VMSMAIL,
LUBERECKI@DEMING@VMSMAIL

Distribution List Truncated

>  What you and our customers and partners should understand about this 
>  decision is:
>  
>          o  Although this agreement would have been nice to have, 
>             Digital's decision to terminate negotiations does NOT have 
>             any impact on our ability to afford FAB 6 or Alpha. 
 
Wrong.  FAB-6 is only 1/2 done (done == 100% production ready), and only
running at 1/25 of its rated capacity, not 1/2 as the newsrags say.  It will
cost another, yep you guessed it, $350,000,000 to get it running at a "full"
5k wafers/week capacity.  By the end of FY96, they hope to have it up to a
whopping 1/5 of rated capacity, or 1000 wafers/week.  The way FABs are built,
they only make money when running at full capacity (economies of scale and all
that).  FAB-6 will never make money if it remains 1/2 "clean."

Sure DS will still be making Alpha chips, but the prices will still be
astronomical and volumes will still be in "Turbolaser" and "Alphastation"
quantities.  You gotta pay to play in the semiconductor industry, and
Digital's senior management is sittin' on their billion and a half of cash.

>  	    Remember: FAB 6 is paid for, and we can well afford to make 
>             the retooling changes required for future versions of the 
>             Alpha chip.
 
This is BS.  It's only 1/2 "paid for."  Sure the building is there, but press
your nose against the glass and you'll see that 1/2 of it is still plywood and
metal girders.  Indoor football, anyone?  To make money, you need a building,
AND a cleanroom, AND a toolset, AND some talented people to run the stuff.
Guess which three of these components aren't up to 100% in FAB6?

A FAB like FAB-6 costs $900 +/- $100 million.  Digital has only spent about
$400-$500 million on it so far ... and we've got what we've paid for, 1/2 of a
FAB.

>  	 o  Digital's decision to terminate negotiations also does NOT 
>             affect Alpha chip design, delivery schedules or build plans 
>             for EV56, EV6 or EV7.
 	
Unless of course you're an underpaid designer, architect, layout engineer,
proces engineer, line technician, etc., etc. with three offers from other
companies for 30% higher pay, better benefits, better location, relocation
benefits, stock options, etc.  The brain-drain in HLO is astounding -- and
running a $100 million loss per annum for another 3 or 4 years sure aint gonna
give Ed Caldwell any incentive to get salaries and bennies up to par with the
rest of the semiconductor industry.  The annual bonus will help, but compared
to 30% higher pay and all the "industry average" benefits, it doesn't even
scratch the surface.  DS management is restricted far too much by "Corporate"
management, and compensation is only part of it.  

>  	 o  Digital anticipated no real financial benefit from any 
>             contract which might have been executed between the two 
>             companies for at least 2 years. Thus, there is no short term 
>             financial impact which results from terminating our 
>             discussions with Cirrus Logic.
 
Well, this sure is true... since it takes about 2 years to order, install, and
production-qualify a toolset.  Agreement or no, indeed we would not make any
money from the deal for at least 2 years if everything went well.  But now,
with no agreement, instead of making a profit in 2 years DS will still be
running losses and consuming corporate resources for some unknown amount of
time.

>  	 o  Digital will continue discussions with other investors. 
 
This is the _worst_ thing that someone could say to an employee in HLO.   So
we gonna have to wait ANOTHER 18 months for ANOTHER deal to fall through?!
Oh, and now that the book to bill ratio is under 1.0 for the first time in 5
years, what will this do to our potential partners' desires for more fab
space?!

Bob Palmer, I hope you're ready to answer some tough questions when you show
up in HLO next week.


- jeff_one_of_the_many_leaving_for_greener_pastures...

    bye jeff.
    
    What we've been told is that there won't be another new FAB built after
    this one without a partner.  It's very important for the future of
    Digital that a partner be signed up and ready for the financial
    commitment, but I believe we have a little time to get the right
    partner.
    
    Mark

Whether there will be _another_ fab is not the issue here.  FAB6, what there
is of it, will be good through 2005 at the current rate of technology growth.

Where the memo in .16 really bites my ass is that people are being asked to
lie to ourselves, our partners, and worst of all our customers.  There's
nothing you can do or say to justify that means to whatever ends it aims to
achieve.

That memo tries to make a bad thing sound not-so-bad, and it does a miserable
job, IMO.  It misses the fact entirely that the Cirrus Deal was for making
CIRRUS chips!  And it misses the fact that HLO *revenues* are at ~120% of plan
so far for FY96, and that's WITHOUT any cash from the failed Cirrus deal.
Hell, if you must play a weak angle, then say that it's already in the DS
business plan to make a profit by 1998 without the deal.  At least you won't
be lying.

Better yet, tell the sales force to tell our partners and customers that the
overworked people in HLO can manage to run a 6 year old 6" reasearch fab at
well in excess of it's original design capacity and yield chips at speeds
faster than ever expected, while also bringing up a newer state of the art FAB
while working at 30% lower pay, sub-industry-standard benefits, and with
limited staffs ... and still manage to make diamonds out of dogshit.  There
are some really friggin' amazing people in HLO, and very little is ever said
of 'em.


- jeff_sayin'

    Tie the last couple replies here to the string running about
    unrealistic competitive information.
    
    This company has got to get its head out of the sand, face realities
    squarely, stop lying to itself and its employees before its to late.
    
    And I do understnd how to make the best of what you have- I have been
    selling DEC stuff since 1969. Ive just learned to ignore the 'official'
    lies, find the truth as best I can, and sell and support successfully.
    How much better might I have done if I had been supplied with the
    truth? 

             
re: Note 4331.17 by SUBPAC::MAGGARD 

    
>>  What you and our customers and partners should understand about this 
>>  decision is:
>>  
>>          o  Although this agreement would have been nice to have, 
>>             Digital's decision to terminate negotiations does NOT have 
>>             any impact on our ability to afford FAB 6 or Alpha. 
> 
>Wrong.  FAB-6 is only 1/2 done (done == 100% production ready), and only

Jeff, I think the point of this message is to say that terminating the deal
with cirrus will not impact DS's ability to build Alpha for the SBU.  The 
capacity we will have by Q1FY97 will more than meet the forcasted demand for
Alpha and the other parts DS produces. On top of this DS has been given 
more money by Digital to buy CMOS7 tools.

-Bruce 
    

re: -.1

...then it should say so, and not make misleading claims about the status of
the FAB or the business unit.  Hopefully the sales force will be smart enough
to use your words, which are indeed correct and not misleading, Bruce.


- jeff

> Jeff, I think the point of this message is to say that terminating the deal
> with cirrus will not impact DS's ability to build Alpha for the SBU.  The 
> capacity we will have by Q1FY97 will more than meet the forcasted demand for
> Alpha and the other parts DS produces. On top of this DS has been given 
> more money by Digital to buy CMOS7 tools.

  It may be entirely possible for DS (without Cirrus Logic) to
  *BUILD* Alpha for the SBU.

  It appears to remain impossible for DS (without Cirrus Logic)
  to *PRICE* Alpha at a price-point where it can capture enough
  market share to survive as a viable architecture.

                                   Atlant

        >  It may be entirely possible for DS (without Cirrus Logic) to
>  *BUILD* Alpha for the SBU.
>
>  It appears to remain impossible for DS (without Cirrus Logic)
>  to *PRICE* Alpha at a price-point where it can capture enough
>  market share to survive as a viable architecture.

    No matter what, EV5 EV56 and EV6 are going to be very expensive parts.
    It costs more to package ones of these than it cost to buy a 486 chip.

    For EV4, 45, 5, 56, and 6 our designers have looked to make the fastest
    processor possible.  Manufacturing cost is not high on the priority
    list.  The LCA parts were a joke, they were simply the high cost
    designs with a PCI interface added.  Destined to be expensive and not 
    attractive to many people. Digital needs to develop an Alpha processor
    from scratch that will be inexpensive to manufacture and integrate into
    a system, while keeping a performance lead. I don't know if this is
    possible, but it is the only way we will be able to offer Alpha at
    Intel prices.  

    -Bruce

> It costs more to package ones of these than it cost to buy a 486 chip.

Our EV-45/5/56 packaging costs are not that high.  More than 486DX2-66
perhaps, but certainly not a 486DX4-133.  The high price problem is not in the
package, it's in the FAB and the other high costs of supporting the design,
assembly, test, process engineering, etc., etc., etc...  

EV-6 might have a more expensive package than EV-5, -- but even so there's 486
chips out there today that would cost more than even the most expensive EV-6
package option.


- jeff

>The high price problem is not in the
>package, it's in the FAB and the other high costs of supporting the design,
>assembly, test, process engineering, etc., etc., etc...

My point is everything we do to make EVx is expensive and running lots of
material through FAB6 is not going to make EVx cost the same a X86 parts.
The packaging cost was just an example.

>EV-6 might have a more expensive package than EV-5, -- but even so there's 486
>chips out there today that would cost more than even the most expensive EV-6
>package option.

    Are you counting the capacitors we are going to try and wack into the
    PGA when you say this?

-Bruce

> The packaging cost was just an example.

X86 spends more in packages per chip than Alpha both as a percentage of
product revenue per chip and just in straight cost.  $90 gets you a P6 package
vs. $50 for EV-5.  Whoops.  I better be careful not to get ::KRATZ started on
chip costs :-)

>     Are you counting .... when you say this?

Yep.  


- jeff

>X86 spends more in packages per chip than Alpha both as a percentage of
>product revenue per chip and just in straight cost.  $90 gets you a P6 package
>vs. $50 for EV-5.  

I have seen higher cost for packaging an EV5, but maybe you know better.
With EV6 requiring us to run extra wafers to make caps that will them have
to go in the package with each EV6 should set the record for packaging
cost. From what I have see Comparing P6 isn't fair unless you want to
somehow add in the cost of a small SRAM cache.  While my example might not
be the best,  I still believe that many of factors such as packaging and
our full flow process required for the current EVx's will make it
an expensive part even if we run at high volume.  The server market can
afford this to some extent while the desktop market can not,  To capture
any significant amount of the desktop market, we need a Alpha chip designed
for that market.

>Whoops.  I better be careful not to get ::KRATZ started on chip costs :-)

He doesn't need anyone to get him started :-)