Conference 7.286::digital

2329.0. "FY93 Q2 Results" by SCAACT::RESENDE (Y R U U?) Thu Jan 14 1993 11:58

From Livewire ....
       Digital reports improved second quarter operating results, 
                          six percent revenue growth 

  Digital today announced operating results for the second quarter, which
  ended Dec. 26, 1992.

  For the quarter, the company reported total operating revenues of 
  $3,689,443,000, up 6 percent from the $3,479,489,000 of the comparable quarter
  a year ago.  The company reported a net loss for the quarter of $73,859,000, 
  compared with a net loss of $155,236,000 of the comparable quarter a year 
  ago.  Per-share results for the quarter were a loss of $.57 versus a loss of 
  $1.25 for the second quarter of fiscal 1992.

  For the six months ended Dec. 26, 1992, the company reported total operating
  revenues of $7,003,742,000, up 3 percent from the $6,772,574,000 of the 
  comparable period a year ago.  Net loss for the first six months of fiscal
  1993 was $334,405,000, versus a loss for the similar period a year ago of 
  $629,069,000, which includes a $485,495,000 charge for a change in accounting 
  principles related to post-retirement health benefits.  Per-share results were
  a loss of $2.60 versus a loss of $5.05 for the first six months of fiscal 
  1992.

  "We are encouraged with our progress toward the transformation of Digital," 
  said Bob Palmer, president and CEO.  "While we still have much to do and are 
  not satisfied with any loss, we continue to work diligently toward our goal 
  of becoming a growing and profitable company again, which our customers, 
  partners, shareholders, and employees expect.

  "Customers are enthusiastic about our new Alpha AXP products, and we are 
  encouraged by the positive response among software and hardware developers who
  have selected Alpha AXP as their 64-bit RISC architecture.  There are 
  currently more than 1,000 software developers who are porting more than 2,000 
  applications to Alpha AXP.  The simple migration path that the company 
  provides to the next generation Alpha AXP systems appears to have improved 
  sales of existing Alpha-ready VAX products as well.

  "This past quarter we also announced the restructuring of the company's 
  operations into nine customer-focused business units," continued Bob.  Five 
  of the nine are defined by natural customer groupings of industries while 
  the other four are defined by the nature of their products and services.  
  These business units are chartered to drive revenue growth and profitability
  in specific markets where our strengths and opportunities are greatest.  
  Beginning in fiscal year 1994, these business units will have all of 
  Digital's worldwide profit responsibility."

  Bill Steul, vice president and chief financial officer said, "While we were 
  encouraged by our improvement in overall operating results compared with last 
  year, results from some countries outside the U.S. remained soft.  Given the 
  economic uncertainties worldwide, our outlook remains cautious.

  "Our cost reduction efforts are continuing to produce results.  R&D spending
  declined by $19 million and SG&A spending was essentially flat compared with
  the second quarter of last year.  Our balance sheet remains strong as asset 
  management continues to improve in several areas.  Total population declined
  by almost 6,500 in the quarter to 102,100."   


    				       THREE MONTHS ENDED
    			      DECEMBER 26, 1992	  DECEMBER 28, 1991

PRODUCT SALES			 $1,967,234,000	 $1,939,387,000
SERVICE & OTHER REVENUES	  1,722,209,000	  1,540,102,000
TOTAL OPERATING REVENUES	  3,689,443,000	  3,479,489,000
COST OF PRODUCT SALES		  1,116,538,000	  1,095,121,000
SERVICE EXPENSE			  1,058,270,000	    943,810,000
TOTAL COST OF SALES		  2,174,808,000	  2,038,931,000
RESEARCH & ENGINEERING		    404,843,000	    423,603,000
SELLING, GENERAL & ADMINISTRATIVE 1,177,306,000	  1,181,379,000
INTEREST INCOME, NET OF EXPENSE       1,655,000      11,761,000
(LOSS) BEFORE INCOME 
 TAXES				    (65,859,000)   (152,663,000)
PROVISION FOR INCOME TAXES	      8,000,000       2,573,000


NET (LOSS)			   $(73,859,000)  $(155,236,000)
WEIGHTED AVERAGE SHARES
 OUTSTANDING			    129,154,484     124,257,437
NET (LOSS) PER SHARE			 $ (.57)      $   (1.25)

    				        SIX MONTHS ENDED
    		               DECEMBER 26, 1992  DECEMBER 28,1991

PRODUCT SALES			  $3,735,055,000 $3,802,236,000
SERVICE & OTHER REVENUES	   3,268,687,000  2,970,338,000
TOTAL OPERATING REVENUES	   7,003,742,000  6,772,574,000
COST OF PRODUCT SALES		   2,136,495,000  2,005,269,000
SERVICE EXPENSE                    2,075,920,000  1,837,014,000
TOTAL COST OF SALES		   4,212,415,000  3,842,283,000
RESEARCH & ENGINEERING		     810,320,000    835,956,000


SELLING, GENERAL & ADMINISTRATIVE  2,308,493,000  2,239,085,000
INTEREST INCOME, NET OF EXPENSE       11,081,000     32,330,000
(LOSS) BEFORE INCOME TAXES &
 CUMULATIVE EFFECT OF CHANGE	    		   
 IN ACCOUNTING PRINCIPLE	    (316,405,000)  (112,420,000)
PROVISION FOR INCOME TAXES	      18,000,000     31,154,000
(LOSS) BEFORE CUMULATIVE EFFECT 
 OF CHANGE IN ACCOUNTING PRINCIPLE  (334,405,000)  (143,574,000)
CUMULATIVE EFFECT OF CHANGE IN          
 ACCOUNTING PRINCIPLE,NET OF TAX    	 ---	    485,495,000       
NET (LOSS)			   $(334,405,000) $(629,069,000)
WEIGHTED AVERAGE SHARES
 OUTSTANDING			     128,578,210    124,546,908
(LOSS) PER SHARE 		        
 BEFORE CUMULATIVE EFFECT OF
 CHANGE IN ACCOUNTING PRINCIPLE         $  (2.60)       $(1.15) 


(LOSS) PER SHARE ON CUMULATIVE
 EFFECT OF CHANGE IN ACCOUNTING 
 PRINCIPLE            	       		    ---          (3.90)
NET (LOSS) PER SHARE                    $  (2.60)       $(5.05)


                            Q2 - FY 93

PRODUCT SALES ........................... DLRS  1,967,234,000  	        
SERVICE AND OTHER REVENUES...............       1,722,209,000                 
TOTAL OPERATING REVENUES.................       3,689,443,000    
COST OF PRODUCT SALES....................       1,116,538,000
SERVICE EXPENSE..........................       1,058,270,000
TOTAL COST OF SALES......................       2,174,808,000    
                         GROSS MARGIN                  41.1 %    

                                
RESEARCH & ENGINEERING................... DLRS    404,843,000  	          
SELLING, GENERAL & ADMINISTRATIVE........	1,177,306,000    
OPERATING (LOSS).........................         (67,514,000)
                                OPERATING MARGIN       (1.8)%
INTEREST INCOME.......................... DLRS     14,209,000
INTEREST EXPENSE.........................          12,554,000
(LOSS) BEFORE INCOME TAXES...............         (65,859,000)
                                PRE-TAX MARGIN         (1.8)%
INCOME TAXES (TOTAL FEDERAL, STATE &
  FOREIGN)...............................           8,000,000

EFFECTIVE TAX RATE                                      12.2%             
NET (LOSS)............................... DLRS    (73,859,000)
(LOSS) PER SHARE.........................                (.57) 
WEIGHTED AVERAGE SHARES OUTSTANDING......         129,154,484


                   BALANCE SHEET - Q2 FY93

CASH & CASH EQUIVALENTS.................. DLRS  1,365,340,000
ACCOUNTS RECEIVABLE, NET.................       3,132,020,000     
  A.R. DAYS SALES OUTSTANDING 		  	    76 DAYS

INVENTORIES:  RAW MATERIALS......... 336,150,000
              WORK IN PROCESS....... 601,119,000 
              FINISHED GOODS........ 894,961,000  
                       
                       TOTAL............. DLRS  1,832,230,000 

PREPAID EXPENSES.........................         385,945,000        
DEFERRED INCOME TAX CHARGES, NET.........         222,794,000     
TOTAL CURRENT ASSETS.....................       6,938,329,000


NET PROPERTY, PLANT & EQUIPMENT..........       3,342,265,000
OTHER ASSETS NET.........................         745,162,000
TOTAL ASSETS.............................      11,025,756,000
BANK LOANS & CURRENT PORTION OF LTD......          44,181,000	 
TOTAL CURRENT LIABILITIES................       4,284,492,000
DEFERRED TAX CREDITS, NET................          23,033,000
LONG-TERM DEBT...........................         779,785,000
POSTRETIREMENT BENEFITS..................       1,208,682,000
TOTAL LIABILITIES........................       6,295,992,000
STOCKHOLDERS' EQUITY.....................       4,729,764,000
BOOK VALUE PER SHARE.....................               35.96    
CAPITAL SPENDING (INVESTMENT IN PP&E)- Q2         124,544,000
DEPRECIATION & AMORTIZATION......... - Q2         224,544,000
CAPITAL SPENDING (INVESTMENT IN PP&E)-YTD         256,463,000
DEPRECIATION & AMORTIZATION......... -YTD         414,163,000


NON U.S. REVENUES - QTR..................       2,406,977,000       
                                                      or 65%                 
NON U.S. REVENUES - YTD..................       4,473,686,000
                                                      or 64%
TOTAL EMPLOYEE POPULATION, APPROXIMATELY.            102,100

And DEC Stock is up 5 3/8 to 40 1/4 at this time.

-  David

DEC 40 1/4, change +5 3/8; DJIA 3261.13, change -2.43 at 11:35.
Report entered at Thu Jan 14 11:37:17 1993.

Brilliant! If this momentum keeps up, Palmer will have kept every commitment
he made to the stockholders by the end of Q3.
								- Ian W.

This note is being entered for a member of the noting community that wishes to
remain anonymous.  If you wish to reply directly to the noter, please send me
mail and I will forward it to the noter.  Unless you specify otherwise, your
identification will be left in the mail message.

Bob - Co-moderator DIGITAL


Re. Q2 results --

Quarterly/semiannual results indicate that we are not doing what is needed to 
turn DEC around.

1. While total revenues 92-93 for quarter increased $210M, total cost of 
   sales for same period increased $ 140M and GS&A decreased only $4M. Thus,
   for the cut of about 16,000 people during the preceding year, GS&A costs 
   dropped only $4M for the quarter, for a savings of $250 per employee cut 
   per quarter. In other words, after cutting 16,000 people in the past year, 
   we have nothing to show for it on our income statement. 

   For the six months year-to-year it's worse: revenues up 3%; cost of doing 
   business up 9%.

2. Further, in the past several years we have taken a total write-down of 
   approximately $2.5 billion and have decreased headcount by about 34,000. 
   If we assume that the average DEC employee makes $25K (probably 
   conservative) and left with an average "package" of 24 weeks (also 
   conservative) plus continuation of benefits, etc., we have spent at least
   $900M to cut headcount without making a dent in the cost of our doing 
   business. And this estimate assumes that $1.6B of the $2.5B went to _other_
   than headcount reduction. If not, we spent several billion dollars with no
   meaningful effect on company profitability.  

3. Total cost of sales -- costs other than personnel -- has increased at 
   2/3 the rate of revenue over the past year, indicating a fundamental 
   unprofitability of our traditional businesses. 

4. Also, 65% of our business was from overseas operations, indicating an 
   accelerating drop in domestic business, where we concentrate the majority of 
   our investment.

This is hardly a detailed analysis (about 10 minutes worth). But it seems to 
say that unless DEC can find some way to increase profitability besides 
cutting employees, DEC will remain unprofitable.

    Well, let me see now.  Q1 it was a loss of a hundred and what million?
    Let's see, Q2 a loss of 73 million.  Sounds better already.  Stock went
    up today to the point that i came into work with a loss, and am leaving
    with making some good bucks today.  
    
    Bob Palmer has been in office only 3.5 months now, and this is the
    impact that we have seen.  We know that there is more down the pipeline
    besides layoffs.  But we needed layoffs.  The company is still
    operating with less employees.  We need to eliminate more.  I am
    looking forward to Q3 and Q4 numbers.  I think that alot of positive
    changes are coming down the line, and am looking forward to selling my
    stock before christmas with a 100% gain.
    
    Go ahead Bob Palmer, keep doing what your doing!!
    
    
    a happy employee, investor
    

    
    Re:.3
    
    Clinton could take a lesson from BP.
    
    -Ed
    

    
     I don't agree with .4, but his view is common enough, and he
    or she need not be anonymous.  Yes, DEC still has problems,
    but they are NOT Wang-like or DG-like, both of which companies
    lost big market share, which we never have.  Most businesses
    would drool at $7B revenue growing at 6%, with a 41% gross
    margin !  In order to lose money doing this, we have had to
    use all our talent (!?) this first half-year.  Turning this
    around will take time, and this is a good first step.  I think
    DEC is going to be profitable sometime in calendar '93, and,
    barring further disasters, stay that way.  BP is on to something.
    

           Re: .5
               
>   Bob Palmer has been in office only 3.5 months now, and this is the
>   impact that we have seen.  
               
>   Go ahead Bob Palmer, keep doing what your doing!!

           That's like giving Clinton credit, if we came out of recession
           in next few months... hasn't Bush been there last four years?
           
           And, don't you think number would've been the same with KO
           still here?  Come on now?
           
           Steve
           (encouraged, but "the beatings will continue")
               
           PS- It is odd that our expenses are still so high, isn't
           it?  
           Somebody must be getting Wall St. Journal subscriptions again :-)

    We have Wang-like and DG-like problems.  We're just a bit bigger so it
    takes longer to make an impact.
    
    The loss of the minicomputer market is both absolute (ie fewer people
    are buying them, period) and relative (ie IBM and HP are bigger in
    mid-range systems than Digital).  Yet this identification with a
    shrinking market is where Digital is positioned.
    
    The services profitability lags behind the product profitability
    becuase a large installed based of proprietary systems will continue to
    be serviced by Digital until they are replaced with open systems.
    
    Digital as a company servicing the legacy of the 70's and 80's is
    probably about 30K employees and probably profitable for 10 years.
    
    Digital as a vital company to the world-wide computing industry in open
    systems, networking, systems integration, etc. has yet to prove itself
    from either a product or profit point of view.

RE:         <<< Note 2329.8 by QETOO::SCARDIGNO "God is my refuge" >>>
    
          >> That's like giving Clinton credit, if we came out of recession
          >> in next few months... hasn't Bush been there last four years?
           
            ...I dunno...things picked-up rather dramatically RIGHT after
            Bush got dumped.  Consumer confidence and all, you know...


       As for Palmer being in for a short time, I still think he has had 
       a lot of impact on the company (positive and negative).  Give the
       man his due.

                                      Greg   

    I presume the ending headcount included the loss of the December 7th
    TFSOs. Does anybody know for sure. Reason I ask is because due to the 9
    weeks they're still all actually employees at present and were so on
    December 31st. If they are employees how can the company not include
    them in its headcount?
    
    Dave

    
    Re: .9
    
    
    I believe the tide is changing - Alpha ; new services for the 90s;
    re-positioning as a company that can help customers down size etc....
    are going to replace our reliance on our traditional markets - 
    
    Yes we will be relying on services resulting from technology of the 70s
    and 80s but as cash cows which will provide the funding for the
    stars of tommorow.
    
    Martin