Conference 7.286::digital

As it appears in LIVEWIRE


 Digital reports first quarter operating results

  For its first quarter, which ended September 28, 1991, Digital reported 
  total operating revenues of $3,293,085,000, up 6 percent from the 
  $3,093,370,000 of the comparable quarter a year ago.  Net income for the 
  quarter was $28,580,000, up 9 percent from the $26,177,000 of the comparable 
  quarter a year ago.  Quarterly earnings per share were $.23 versus $.21 last 
  year.

  Jack Smith, senior vice president for Operations, noted, "We are encouraged 
  by the improved operating results, even in the face of soft economic 
  conditions around the world.  Many companies continue to postpone purchase 
  of computers while their businesses remain slow. We are particularly pleased 
  that our service revenues continued to grow at 16 percent year over year and 
  our desktop integration business maintained its robust growth.  In addition, 
  tight cost controls resulted in essentially flat spending in the quarter.  
  We are encouraged by substantial progress we've made in the current 
  restructuring effort."   

  Ken Olsen, president, said, "Both current and a growing number of new 
  customers are pleased with our strategy to provide open, distributed  
  systems that work in their multivendor environments.  Digital's strengths in 
  networking, multivendor integration, and global support are key to the 
  success of this strategy.

  "We intend to compete on the strength of our ability to provide an open 
  advantage to our customers.  Later this month we will introduce and deliver  
  major new open technologies, open business practices and open services that 
  will prove it.  For years, Digital's VAX systems have been the standard 
  against which the industry compared itself.  With this upcoming 
  announcement, VAX will jump into a leadership price/performance position 
  in the industry.

  "Digital remains committed to improved revenue growth, profitability and 
  enhanced shareholder value.  To increase revenues, we continue to introduce 
  new systems, software and services; aggressively market our low-end systems 
  and peripherals; and expand channels of distribution.  In addition, we are 
  continuing to reduce all portions of our cost structure.  At a time when the 
  industry is faced with rapid and pervasive change, Digital's financial 
  strength and flexibility allow it to respond to these challenges and 
  continue to invest for the future."

       OPERATING RESULTS FOR THE FIRST QUARTER ENDING:
    			SEPTEMBER 28, 1991    SEPTEMBER 29, 1990

PRODUCT SALES		  $ 1,862,849,000     $ 1,865,558,000
SERVICES & OTHER REVENUES   1,430,236,000       1,227,812,000
TOTAL OPERATING REVENUES    3,293,085,000       3,093,370,000
COST OF PRODUCT SALES	      907,835,000         878,015,000
SERVICE EXPENSES	      888,292,000         779,708,000
TOTAL COST OF SALES	    1,796,127,000       1,657,723,000
RESEARCH & ENGINEERING	      408,721,000         401,952,000
SELLING
 GENERAL & ADMINISTRATIVE   1,051,645,000       1,023,576,000
NET INTEREST (INCOME)/EXPENSE (20,569,000)        (24,783,000)
INCOME BEFORE INCOME TAXES     57,161,000          34,902,000
INCOME TAXES		       28,581,000           8,725,000
NET INCOME		       28,580,000          26,177,000
AVERAGE NUMBER OF SHARES 
 OUTSTANDING		      126,884,779         123,774,888
NET INCOME PER SHARE               $  .23              $  .21


PRODUCT SALES ...........................     $ 1,862,849,000          
SERVICE AND OTHER REVENUES		        1,430,236,000                 
TOTAL OPERATING REVENUES.................       3,293,085,000
COST OF PRODUCT SALES 			          907,835,000
SERVICE EXPENSE..........................         888,292,000
TOTAL COST OF SALES			        1,796,127,000
                             GROSS MARGIN                45.5%
RESEARCH & ENGINEERING...................       $ 408,721,000          
SG&A (SELLING, GENERAL & ADMINISTRATION)        1,051,645,000
                                OPERATING MARGIN          1.1%
INTEREST INCOME..........................       $ (27,098,000)
INTEREST EXPENSE                                    6,529,000 
INCOME BEFORE INCOME TAXES...............          57,161,000
                                PRE-TAX MARGIN            1.7%
TAXES (TOTAL FEDERAL, STATE AND FOREIGN).          28,581,000                  
                             EFFECTIVE TAX RATE            50%              
NET INCOME                            	         $ 28,580,000
EPS......................................                 .23
AVERAGE SHARES OUTSTANDING                        126,884,779

                     BALANCE SHEET - Q1 FY92

CASH & CASH EQUIVALENTS........               $ 2,056,745,000
ACCOUNTS RECEIVABLE (NET)                       3,175,614,000     
(RE:  A.R. DAYS SALES OUTSTANDING)   	              87 DAYS

INVENTORIES:  RAW MATERIALS.........333,138,000
              WORK IN PROCESS.......548,641,000  
              FINISHED GOODS........820,934,000   
                       
                       TOTAL..............    $ 1,702,713,000  

PREPAID EXPENSES.........................         417,088,000        
DEFERRED INCOME TAX CHARGES, NET	          430,200,000
TOTAL CURRENT ASSETS                            7,782,360,000
NET PROPERTY, PLANT & EQUIPMENT..........       3,708,081,000
TOTAL ASSETS                                   11,940,994,000

SHORT TERM DEBT (CURRENT PORTION OF LTD).          21,776,000
TOTAL CURRENT LIABILITIES................       4,101,245,000
DEFERRED TAX CREDITS NET                           17,000,000
LONG TERM DEBT...........................         146,057,000
TOTAL LIABILITIES........................       4,264,302,000
STOCKHOLDER'S EQUITY                            7,676,692,000
BOOK VALUE PER SHARE.....................               61.37
CAPITAL SPENDING (ADDITION TO PP&E)               136,161,000
DEPRECIATION & AMORTIZATION..............         200,659,000
NON U.S. REVENUES                               2,045,214,000
                                                      or   62%                 
TOTAL EMPLOYEE POPULATION APPROXIMATELY               115,300

    Encouraging considering recent bombshells by such noteables as IBM with
    their 80+ decrease in quarterly profits. We still have a long way to
    go. I still can't help but believe this almost fanatical obsession with
    quarterly results hurts DEC and all of corporate America. It smacks of
    greed. One recent article in Business Week (of all places) discussed
    the question: "Does Wall Street Really Matter All That Much Anymore?".
    The article exlpored compeititiveness from a global, long range
    perspective. In that scenerio what DEC did relative to IBM this quarter
    has little or no meaning.
    
    Gene.

    re-.1
    Wall Street cannot see or think beyond 4:00PM on a daily basis!
    
    Mike

    Hmmm ...
    
    Curious how the only one who really profited from our cost cutting
    measures as reflected by the gain in Net Income Before Taxes.....
    ...	was SAM.
    
    /Mike
            

    Good news, but miles away from where we want to be.  Profits are
    only .8%, which is basically miserable.  Means that services are still
    supporting the product business almost entirely.
    
    I'd like to believe that we are ignoring the short term syndrome, but
    every message I see, in the TSNG world anyway, is ship as early as
    possible, maximize short-term revenue, long term penalties be damned.
    
    

    In light of these OK results, why would the stock be trading DOWN
    almost 2 points this afternoon?

    Because these results are not "OK".  From a Wall Street perspective
    they're not seeing the results of lay-offs, reorgs, etc., yet....except
    in the sense of continuing poor morale, poor numbers and management
    confusion.

    maybe because the market as a whole is backing off from yesterday's
    record high?

I've noticed that:

	1.  When Digital does well, the stock goes down.
	2.  When Digital does poorly, the stock goes down.

The stock only seems to go up when the right random numbers appear.

				Steve

    Look at the numbers and the story is clear. 
    
    Product Sales are flat (for all intent & purpose) as they have been for
    several quarters. Yet, cost of product sales continue to grow through the
    same period. Selling/G&A expense also remains high. All this in spite
    of the efforts to cut costs (Employee population down to 115,300 vs.
    123,500 one year ago.) How can these expense items continue to grow
    when we have let 8,000 people go, and closed many facilities? 
    
    It appears to me that there is a major expense hole somewhere in there
    that hasn't been found, let alone patched. I am not trying to make a
    case for not reducing headcount further but it don't seem to be
    working. The next cut better nail the free spenders. We seem to be getting 
    nowhere fast. Maybe, *JUST MAYBE*, the secret lies in WHO gets cut vs.
    how many get cut.
    
    I'm sure that many people in the investment community share some of
    these feelings.
     
    
    Just some wild rambling. 

It was up over 60 at mid-day...i assume that triggered some programmed selling.

									paul

    
    Paul's probably right. The volume grew after Noontime. As of 3:00 we
    were around 1 million shares traded.
    
    

    A stocks price at any moment reflects investor confidence in the
    future price of the stock. IBM's stock had already been discounted by
    the market long before their actual results were reported, and as the 
    results matched IBM's earlier statements, investor confidence in the
    future price increased and their price went up. If results had been 
    worse than expected, the price would have gone down.
    
    The market is still uncertain about the future price of Digital's stock
    and fears it could go even lower. Confidence will increase when we
    continue to accurately forecast our results and show that we're
    continuing to reduce our costs to produce more operating profits.
    Increased confidence will keep our stock from dropping even more and
    may even make it go up somewhat. That coupled with business indicators 
    showing a turnaround in our Industry will make our stock prices go up 
    even more.
    
    So we can expect continuing measures to reduce costs even more (watch
    IBM as they announce even more cutbacks) and an emphasis on increasing
    sales of all products and services to signal an Industry turnaround.
    The Oct. 30 announcements are critical to this process and our (Sales)
    response to them is critical in keeping the reductions to other parts
    of the Company....! We're past the fat into the muscle, and the organs
    will be next. We can't let that happen.
      

    
    
      My theory:
    
      The stock was especially low due to stories of an abysmal quarter.
    As the quarter ended,  the stock edged upward on rumours that maybe
    the news was better than expected.
    
       After the results were released,  the excitement was over,  and
    the speculators took their profits and left.
    
      There is frequently a pattern of a stock moving up or down in
    anticipation of good or bad news,  then returning to its original
    value after the news breaks.
    
    
    						-al
    

    Predicting stock prices is like predicting human behavior, not what you
    would call an exact science.  About the only way you can generate
    enthusiasm is to put some money down.  Then, all of a sudden, you are so
    involved its hard to remain objective.  :-)
    
    Dick

    
    	There's an old stock market addage that says "Buy on rumor,
    	sell on news"....what that basically means is that the people
    	who track stocks very closely and are astute about picking
    	up clues and whatever information they can get from various
    	sources already know (or have a pretty good idea) before an
    	event happens of what's going to happen.  When it does come
    	about as expected, they take their profits and get out.
    
    	Those are typically the high volume traders and it has a big
    	impact on the market...the little guys like us who don't have
    	time to really tap into all the information that's needed to
    	predict trends typically have to wait until the news comes
    	out and by then its too late because the market has already
    	"discounted" the news.
    
    	The investment community is regularly briefed by Digital and
    	prepped as to what to expect so that there won't be any big
    	surprises when the news actually comes out.  I don't know
    	how their expectations were set this time around, but I suspect
    	that the $3 drop in price could also reflect a difference between
    	how their expectations were set and what actually came out.
    
    	Chuck
    

According to an article in the Boston Globe today, one reason for the drop in
the our stock price was that as part of the announcement Jack Smith also stated
that the outlook for the next couple of quarters was pretty gloomy.  That, along
with the analysis that the hardware part of our business had, at best, broken
even, pretty effectively squelched any potential euphoria in the financial
markets.

/Dave

    .10 brings up some good points.  *Why* are costs still relatively high
    in light of plant closures, layoffs, travel restrictions,....?? These
    containment measures have been going on for nearly 3 years to some
    extent.  
    
    

    I'm willing to bet the stock will trend up for the next 
    several quarters.  In fact, I did bet; I borrowed money
    to pick up some shares.  
    
    Historicly, DEC pulls out of the duldrums before IBM, and I 
    expect a similar pattern this time around.  DEC is in an excellent 
    postition.  To post gains in this climate, while we're
    reorganizing, is *outstanding* performance.  And the growth in service 
    revenues is a *very* good sign when product margins are almost 
    non-existent.  
    
    18 months from now, KO will be a Wall Street darling again...
    
    IMHO,
    Dean F.

    Maybe because while the Titanic is sinking, the band is still playing  
    in the main ballroom, oblivious to the shouting and commotion.
    
    /Mike
    

    re -2 ....... that is IF KO is here 18 months from now.  I would
    give slightly better than even odds he will be fishing in Maine.

    
    Unbelievable.

    .9 forgot the additional two rules:
    
    	3 When IBM does well, Digital stock goes down
    	4 When IBM does badly, Digital stock goes down
    
    JK

    re. 19
    
    Can I please have some of what you're smoking?

re .24:

He's just being contrarian, which has historically been a good thing for an
investor to be.