Conference 7.286::digital

    They're already 50% bigger than DEC if one goes by the results from
    the last available quarter's revenue (HP: $5.0b, DEC: $3.4b).
    

What does HP's revenue break down to when you remove the non computer
revenue?  We don't make instrumentation or calculators.  

	Dave

    Re .-1
    
    They don't make VAX systems or AXP chips. They're in the same industry
    as us. So it is just sour grapes to try and exclude part of their
    business from the comparison.
    
    Dave

    The FY92 HP revenue breakdown was:
    
    Computer Products =          $12.29B
    Elect. Test & Measurememt  = $ 2.26B
    Medical Eqmnt =              $ 1.00B
    Anaylytical Instruments =    $  .68B
    Electrical Components =      $  .53B
    Total                        $16.76B
    
    The $12.2B of Computer Products breaks down to:
    
    Printers =                   $ 3.90B
    UNIX Systems =               $ 3.05B
    MPE Systems =                $ 2.35B
    PC Systems =                 $  .25B
    OEM Disks =                  $  .10B
    Services =                   $ 2.64B
    Total                        $12.29B
    
    Mark
    

re .4  

Thanks for the breakdown.  Now comparing 12.9B versus whatever we made is
fair.  

re .3

We make computers and components for computers.  If we also made lawn
furniture it wouldn't be fair to lump those profits in and claim to be the
worlds biggest computer vendor based on the combined profits of two different
operating units.  If 12.9 still passes us then HP can fairly say that they
are now number 2.  If 12.9 doesn't pass us then its not a fair comparison for
them to claim 15B  makes them number 2 as its not all computer revenue.

Apples to Apples.  Computers and components.  HP likes FUD.  .4 shows what's
real and what's FUD.  Don't fall for their crap.

	Dave

    I'm sorry, the world doesn't work this way.  The world is not fair.
    
    The business press will not put an asterisk next to Hewlett Packard and
    explain in a footnote that they have significant non-computer-related
    revenue.
    
    By the way, it's been quite some time since HP's quarterly revenue has
    execeeded Digital's.  Why was this regarded as news?

    HP: "We make digital calculators.  We make digital computers.  We make
    all kinds of digital things.  In fact, we make more than Digital.  We also
    make analog things ..."
    
    Steve ;^)

SUBJECT:  HP TO PROVIDE GLOBAL SUPPORT SERVICES FOR MICROSOFT WINDOWS NT
SOURCE:   Business Wire via First! by INDIVIDUAL, Inc.
DATE:     May 18, 1993
INDEX:    [5]
- ----------------------------------------------------------------------------

  PALO ALTO, Calif.--(BUSINESS WIRE) via First! -- Hewlett-Packard Co. and
Microsoft Corp. Tuesday announced that they have signed an agreement under
which HP will provide worldwide support services for Microsoft Windows NT.

  Under this agreement, HP will have direct access to Microsoft's technical
resources, including Microsoft engineers and critical Knowledge Database
information required to ramp up and provide support services to the Windows
NT computing environment quickly. Specific processes and systems put in
place to facilitate the exchange of information include escalation
procedures for problem resolution and direct access to Microsoft's technical
resources.

  Building on HP's existing support-services relationship with Microsoft, HP
will extend the breadth and depth of its open-systems, client/server
support-services offering to include the Windows NT environment.

  Depending on the customers' specific needs, on-site and remote services
may include information technology (IT) architecture consulting, migration
and interoperability planning, solution design, education/training, custom
application development, applications and operating-system support,
implementation/deployment assistance, network consulting and support, and HP
Help Desk.

  HP is one of only a few major systems vendors capable of providing this
level of high-end multivendor support worldwide.

  "Leveraging HP's global support-services infrastructure and reputation as
a leader in providing multivendor support solutions, we can ensure our
large, multinational customers a smooth implementation to Windows NT," said
Dwayne Walker, Microsoft's director for Windows NT and networking products.

  "Two years ago we established one of our first service-focused agreements
with HP.  Today, HP's continued support through both its worldwide service
organization and knowledge of the reseller channel is critical to ensuring
the effectiveness of Windows NT in the marketplace."

  The HP/Microsoft support-service agreement also will allow Microsoft to
leverage HP's strong presence in the reseller community to build support for
Windows NT in the channel.  Through the HP Dealer Premier support program,
HP will enable resellers to offer a broad range of HP-backed Windows NT
services to meet their customers' multivendor support needs.

  "Effective support requires support providers to anticipate customer
needs.  With this in mind, it's HP's strategy and legacy to be at the
forefront of emerging standards, as well as new technologies such as Windows
NT," said Lane R. Nonnenberg, group marketing manager for HP's Worldwide
Customer Support Operations.

  "Considering that there are more than 14 million copies of Windows on
desktops today, Windows NT is positioned to be a factor for the '90s.  By
working with Microsoft from the start, we can give our customers a greater
level of support should they choose to adopt Windows NT in the future."

  In a related announcement Monday, HP unveiled a new line of aggressively
priced network servers, the HP NetServer LE and LM models.  These HP
NetServers will support Microsoft Windows NT.

  Hewlett-Packard Co. is an international manufacturer of measurement and
computation products and systems recognized for excellence in quality and
support.  The company's products and services are used in industry,
business, engineering, science, medicine and education in approximately 110
countries.  HP has 93,800 employees and had revenue of $16.4 billion in its
1992 fiscal year.

  NOTE TO EDITORS:  Microsoft is a U.S. registered trademark of Microsoft
Corp.

  CONTACT:  Hewlett-Packard Co., Mountain View | Emily Cobb, 415/691-5902

[05-18-93 at 14:12 EDT, Business Wire, File: b0518141.301]

------- End of Forwarded Message

Note that almost 1/4 of the HP revenue was from printers, which was a larger 
share then either MPE or UNIX system.  HP sucess is due to their printers, not 
their computer systems.





						-Paul

    So why aren't _we_ making $$$ from competitive printers?
    
    I think many of you are missing the essential point here. What HP, or
    any other computer industry company, actually makes is irrelevant. All
    that is important in the long run is how well they are doing in making
    a profit selling printers, chips, heart monitors, or kitchen appliances, 
    for that matter.
    
    This "A _real_ computer company only sells [X]" is part of the mindset
    that has resulted in DECasaur.
    
    

    Re:10   Sorry to disagree.
    
    		H/P is a success because they offer complete solutions to
    the customer with: (T)imeliness, (Q)uality and (C)ost !   Which we
    don't, by the way IBM either.

    
    
    	re .7
    
    	So when you think of Mitsubishi Corp., what do think of?
    	Automobiles? Silicon? Televisions?
    
    	Separating revenue streams for purposes of discussion is valid.
    	Buying something from a vendor because they are number X is not.
    
    	John

    ... if H-P is a computer company, it may be the US second-largest
        but...
    
        C.Itoh, which also has a substantial printer-making/selling arm has
    annual sales in excess of $US150 Billion.  That should make them the
    world's largest computer company by being more than double the size of
    IBM.  
    
        Interestingly enough, they don't downsize or rightsize or search
    for 'core competencies' or any of these other biznewspeak things.  They
    simply look for opportunities which should be profitable and go after
    them.
    
    

    re:.14 etc.
    
    Let's look at the numbers again.
    
    HP's computer business, exclusive of medical and instrumentation but
    including lines that Digital is theoretically in too (printers, Unix,
    service, etc.) is now bigger than Digital's total number.  That's the
    point.
    
    C. Itoh is a trading company whose computer-related sales are small.
    
    Digital was a leader in printers once too.  It's very much a
    computer-related business.

    Who cares what their product mix is.
    
    THEY ARE MAKING MONEY!!!!!!!!
    
    All these responses that say, " You can't compare them to us, we are
    different." are right.  WE ARE LOSING MONEY.
    
    We make printers too, but we are not expanding market share.
    
    Maybe we should look at HP and learn something.  All those nice thing 
    said about HP in th Microsoft NT anouncement are things we would like
    to be true about us, like "leader in multivendor support", "respected",
    and so forth.  Be honest.  HP is eating our lunch while we sit and
    argue about nits.
    
    Judy

>>                        <<< Note 2501.9 by CSCMA::ORR >>>
>>          -< HP beats Digital to being NT Support Representative >-
               ^^^^^^^^^^^^^^^^

Not at all!!  Digital announced full NT support/service some time ago.

John Young was put into the office of CEO of HP because the companie's market
penetration, profit, goodwill, etc. were declining.

Bob Palmer was put into the office of CEO of Digital because our market
penetration, profit, goodwill, etc. are declining.

John Young is doing a fine job with HP.  I'm confident BP will do the same
for Digital.

In the end, I don't care if Digital is #2 or #last in the business.  I simply
have 3 wishes:
	1.  enjoy what I do
	2.  know that my contributions are valued
	3.  work for a profitable company.

Am I too simplistic??

Gerry

Re .16:

>    Who cares what their product mix is.
>    
>    THEY ARE MAKING MONEY!!!!!!!!

I had breadfast this morning with a very good friend of mine who works at HP
(formally Apollo). He told me that HP has profit sharing and they just were
told that their cut this time will be 7%!!!

I wouldn't care if we include peanut sales in our numbers if I could bring
home a 7% bonus!!!!

							Mark

    Based on the it-doesn't-matter-what-else-you-sell approach, I think we
    should all recognize that AT&T is a *MUCH* bigger "computer" company
    than either HP or us. ~/~

    I've often been amazed that AT&T wasn't counted as a computer company. 
    That makes us fourth if you don't count Fujitsu. 
    
    John

      Would  HP's  success have anything to do with providing high
      quality, market driven products that meet or exceed the need
      of the target market? Jeez what a concept. Who cares if they
      are an instrumentation  company,  a  printer  company  or  a
      computer company? They make products needed for today's (and
      tomorrows) information market. Once again, what a concept!
      What can we learn from this?


      mb

    A quick look at HPs latest 3rd Qtr results shows gross revenues
    in excess of $5B/Qtr and the curve is rising. Annualizing this,
    yields a potential $20B+/yr company. Approximately 70% of there
    products are considered "computer systems and peripherals".
    Inkjet printers are a computer peripheral. Digital was once very
    profitable in printers and we in fact once owned the terminal
    market. Without trying to blame anyone, choosing not to continue
    to invest heavily in these products partly caused us to be where
    we find ourselves now. BTW, if one benchmarks DEC against HP,
    (rough math indicates approx $215K/employee) DEC has a long way
    to go in terms of headcount, somewhere around 65K employees.

    In doing revenue or profit/headcount analysis, it IS very important
    that you are looking at Apples to Apples.  You could compare $/HC for
    Coke and Pepsi for example and get skewed results.  This is due to the
    fact that Pepsi owns a lot or Resaurant business (Pizza Hut for
    example) which is very Labor intensive.  You wouldn't expect to get the
    same profit/employee in the resaurant business that you would in the
    soft drink industry.
    
    So, I think it is important when comparing us againt HP that you
    compare the common segments.  That doesn't mean we can't learn from HP,
    but that there are differences between the two companies.  These
    differences should be acknowledged when analyzing/comparing results.
    
    Bing

Re .10

>>    So why aren't _we_ making $$$ from competitive printers?
>>    I think many of you are missing the essential point here. What HP, or
>>    any other computer industry company, actually makes is irrelevant. All
>>    that is important in the long run is how well they are doing in making
>>    a profit selling printers, chips, heart monitors, or kitchen appliances, 
>>    This "A _real_ computer company only sells [X]" is part of the mindset
>>    that has resulted in DECasaur.

No one disputes HP's ability to build the best printers and make money selling 
them..all credit to them. Digital as well as other companies would love to 
have similar printer business, or as you mentioned other businesses such as 
kitchen appliances or as a matter of fact anything you could think that 
generates money. Due to the finite market size companies have to settle for 
less and only do what they are competitive at. 

Currently Digital has a workforce geared towards the computer business. We 
could either continue to compete in that business or change/reskill the 
workforce to do something else. If we chose the first option then it is valid 
to evaluate our competitors by the volume of business they do that competes 
with ours..ie  their computer business. One other metric to measure competition
is how efficient they do business, here we should forget about HP,IBM,Unisys 
and model companies like Intel,Apple and so on. 

    HP has a very different approach to sales than does Digital.
    
    Have you ever called HP and asked to buy a printer.  It won't happen. 
    They'll be happy to telll you the name and phone number of the nearest
    dealer, but they will make it plain that they (HP) do NOT sell
    printers directly to the public.  Not sure, but I don't think the HP
    sales reps can even TAKE an order for printers.
    
    HP has done a very good job at partitioning (if that's a word) their
    products.  They advertise and market the heck out of their printers, 
    but it's their distributor and retail base which is the sales arm. 
    There's a lesson here someplace.
                            
    Chet

    << Included without permission - excellent reading! >>
    
Subject: How HP Sales Operates - [Required reading]                             

This memo is a real find! It should be required reading for all DEC's 
sales reps and support, and marketing.

Many thanks to William Husted, and Tom Walker and Jane Wright of the 
Competitive Sales Team.


The following note is from a Sun sales rep to one of my customers.  Thought it 
may be interesting.


 I just received this email from one of our System Engineers in California who 
used to work for HP.  This is her impressions of how HP works with customers.  
Since I am very aware that HP is waiting in the shadows for an opportunity (just 
as I did for over a year!) I would be interested in your impressions, when you 
have time to share them with me.  Is this what you experience as a customer? 
Please give me any input you have regarding what we can do better at Sun to 
support you the best way possible at GE Appliance.  I already received the 
message about the "Sun support line", and have escalated your input up the 
chain.  Needless to say, we have more control and influence over the local 
resources and support we can make available to you. Thanks for your time.  Talk 
with you soon. 


 From Susan Berger, one of our Sacramento SEs.                        
MY EXPERIENCES WHILE WORKING AT HP                        
================================= 
I worked for HP for 7 years.  Four of those years were spent as a UNIX 
SE/Technical Consultant.  I have now been at Sun as an SE in Sacramento for 8 
months.  During my time at Sun, several people have asked me to jot down some 
helpful hints regarding competing against HP.  I have not focussed on technical 
areas, but on the HP working environment and their inability to work with 
customers as partners. These are just some areas of HP that Sun can easily 
compete against, along with MANY others. When at a customer site I always try to 
mention nonchalantly that I worked for HP.  Inevitably they always come back 
asking, "Why did you leave HP?".  Well, since THEY'VE asked, I feel obliged to 
tell them.

I begin by telling them that, "HP has good products.  If they didn't we wouldn't 
be competing with them", (I don't want them to think this is an HP bashing 
session).  I continue by saying, "HOWEVER, I feel that Sun is a much better 
company". Below are some of the areas that I share with my customers regarding 
my experiences while working at HP. 

SE and SR Goals Conflict                                                   
* SEs are chartered to sell support, while SRs goals are to sell hardware. SEs 
are measured by the consulting services and software/hardware services they 
sell.  SRs on the other hand are measured by how much hardware and software they 
sell.  At the beginning of the year, SRs are given a budget of how many SE hours 
they can use.  If a SR wants an SE to assist with a pre-sales deal, that SR is 
charged by the SE per hour.  The goal of every SE is that each hour worked is 
chargeable, either to a SR or to a customer.  If a SR uses too many SE hours, 
sales management reprimands the SR.  This process discourages the use of SEs 
during the pre-sales cycle. A SR may bring out several different SEs to the same 
account depending on the availability of the SEs.  When an SE is brought out 
it's usually on a sporadic basis. Time isn't invested in having an SE learn 
about a customer's environment, since the SR is charged for this, and since the 
SR never knows which SE will be out next.  What this does in the customer's eyes 
is to show that the SE is not part of the sales team, and that the SE 
organization doesn't understand their environment. Because of this model there 
is no account continuity.                                                         


There are exceptions based on the size of the deal, but the model explained 
above is the norm. While at a customer site, the SE charges the SR per hour.  
However, while charging the SR, the SE is also trying to sell consulting and 
support services, which are items that the SR does not receive commission credit 
for.  SEs charge SRs for any time spent regarding a pre-sales account.  This 
includes work done on-site, in the office, reviewing quotes, verifying technical 
requirements, etc.  Because of this model, SRs are forced to try to do all they 
can on their own
without the help of the SE organization. There is a definite conflict of 
interest between the SR and SE organizations.  Neither organization is working 
toward a common goal, as does Sun's SR and SE organizations.  HP realizes that 
this model doesn't work and are trying to move to a model similar to Sun's. 
However, knowing HP this change will take a very long time, if at all.

Post-Sales Support 
================== 

* A customer must purchase consulting to have any post-sales questions answered 
* by an SE following a sale. When ever working on a pre-sales deal SEs will 
attempt to sell software support, hardware support and consulting services to a 
potential customer.  If that customer has decided not to purchase these services 
and attempts to contact an SE after the sale has been made, (regarding a 
post-sales question or advice), the SE is technically supposed to acquire a P.O. 
for consulting before answering that customer's question.  The consulting rate 8 
months ago was $180 per hour, and $235 per hour for a specialist.  This can be 
very alarming to a customer that has just spent a large sum of money with HP.  
The customers that have previously worked with DEC or IBM seem to accept this 
easier than a customer that has previously done business with Sun.  Many times 
SEs will cheat and answer the customer's question, but will then notify them 
that they can't do it again without a P.O.  This type of model doesn't promote 
an ongoing partnership with customers.                                 
                      

HP's Lack of Resources 
====================== 

* HP employees don't use the equipment they sell. HP is extremely cost 
conscious.  They sacrifice productivity in order to save money in the short 
term.  I was extremely shocked when coming to Sun and seeing the resources, 
(both physical and electronic) that are available.  At HP each SE and SR sits at 
a single desk, next to another's desk, next to another's desk.  There are no 
cubicles, let alone offices.  There is an extreme amount of noise and 
interruption. They refer to it as an open working model.  Each SE is given one 
book case, with a total of 2 shelves, no more and no less.  They get a two 
drawer file cabinet and a terminal.  The terminal is used to read mail from a 
proprietary mail facility called HP Desk, which resides on a proprietary HP 3000 
mainframe.  There is no such thing as exchanging email.  Most information 
disseminated within HP is done via paper, rather than electronically.  To 
acquire pre-sales information not found in your own materials, you dial an 800 
number and talk to a pre-sales coordinator.  That coordinator is not technical.  
The coordinator will search for the information you have requested in a database 
similar to NeWSware.  However, SEs are not given access to this database, and 
since the coordinator is not technical, the information gathered is usually out 
of context or incomplete. HP is trying to follow Sun's model of providing SE's 
with their own workstations.  This was a goal which originated from the SEs.  I 
worked on this proposal for 2 years, and after 2 years only a select group of 
SEs received workstations on their desks.  There has never been a mention of 
providing SRs with workstations.  For those lucky SEs that did receive 
workstations, they found that they were only given enough disk space to load the 
OS.  Since there are no designated servers in each office or within the company, 
SEs could not put any tools on their workstations to make them more productive. 
SEs and SRs don't use the tools or equipment that they sell.  HP as a company 
still runs their business on their proprietary HP 3000s running the MPE OS.  
When HP announces new equipment, it is shipped to customers long before a local 
sales office will see it.  I remember delivering consulting services to 
customers on their new HP 700s, charging them $180.00 an hour, and it would 
sometimes be the first time I had ever 
seen that particular model.  You learn to do a lot of tap dancing. When working 
in the Sacramento office at HP we didn't even have a printer attached to any 
UNIX workstations or servers.  The administrators had some connected to their 
PCs. If you needed to print something out, you'd have to wait until the 
administrators went home, disconnect their printer, set it up on an HP 9000 and 
then print your document.  It was a gross miss-use of SE and SR time. Another 
example of a lack of resources is that each office shares one copy of all 
software and manuals.  When I say each office, I mean that all SEs, SRs and 
Hardware Engineers share a single CD.  Therefore, whenever one person took a CD 
of the OS out of the office to set-up a demo or for a consulting engagment, no 
one else in the office could use it.  It was an amazing miss-use of time having 
SEs, SRs and Hardware Engineers searching for the single OS CD, trying to 
determine who had borrowed it, and when it was coming back.  If a customer's 
system crashed and a hardware engineer had to be out on-site, there might not be 
an OS CD around to reload their system, or if someone needed to stage a loaner 
system, they would have to wait until that CD was returned to the office.    

Even something as simple as needing a datasheet could waste valuable time.  
Since SEs and SRs don't have access to a product like NeWSware to download 
datasheets, if our office didn't have a datasheet that I was looking for in the 
literature room, I would have to call another office.  I would have to have an 
administrator search their literature room and fed-x me the datasheets.  You 
would sometimes have to call 3 offices before finding the datasheets you needed.  
I have found that I have the tools a Sun to do my job productively.

What is Distributed Computing? 
============================= 

* HP doesn't know how to sell distributed computing. When I was a HP I truly 
believed that HP did distributed computing.  I thought that using NFS was 
distributed computing.  I was awakened when coming to Sun and discovering tools 
such as the Automounter and NIS. HP has NIS, but no one uses it. I remember 
being told to avoid it unless a customer specifically asked for it. A typical HP 
Distributed environment would be an NFS server and many workstations.  However, 
if you have 20 users, the administrator would have the huge task of maintaining 
20 different passwd files, kernels, and other system files.  Since NIS was never 
implemented, if user Joe sat down at anyone elses workstation he would find that 
he may not have a login, and if he does, it's not the same environment that he's 
used to. I wouldn't consider this a good example of distributed computing. 

The Conflict Between the HP 9000 Series 800 and 700 
===================================================

* HP stands for High Price when selling the HP 9000 series 800s. There are two 
divisions at HP that design RISC workstations and servers.  One designs the HP 
9000 series 800s, and the other designs the HP 9000 series 700s.  The 700 and 
800 use the same PA-RISC CPUs. The 700s can do everything that the 800s can do 
except that there isn't a 700 model with as many I/O slots, or one that offers 
multi-processing, as some of the 800 models do.  Many HP employees have asked 
"Why don't we just extend the 700 series to include a model with more I/0 
slots?".  The problem with this idea is that thousands of people in 800 division 
would be without a job.  There many have been a better reason, but we were never 
told one.  The series 700s have been marketed to compete with Sun, thus having 
to compete on value and price performance.  When competing with 700s HP has a 
strong price performance story.  However, the series 800s are marketed to 
compete in the commercial environment, which were traditionally IBM and DEC 
shops.  These are customers that are used to paying high prices and therefore 
the 800s are competing on an IBM and DEC price performance scale. If you are 
competing with HP and they are proposing an 800, you are bound to win on price 
performance.  I remember several times when I was competing with Sun in a 
commercial environment, where price performance was key.  However, since it was 
a commercial account sales management would instruct the SRs to sell 800s, 
rather than 700s, even if I/O slots were not an issue.  If HP is proposing an 
800 your potential customer, have your customer ask HP why they aren't proposing 
a 700. 

I hope these selling tips will help when competing against HP. 
 


Distribution:
 
TO:  Jim Tracy                            ( TRACY.JIM )
TO:  RONALD D. TATE @STO                  ( TATE.RON )
TO:  CARL ARIZPE @STO                     ( ARIZPE.CARL )
TO:  JIM GRUSS @STO                       ( GRUSS.JIM )
TO:  Dave Kinzel @STO                     ( KINZEL.DAVE )
TO:  Sue Madden @STO                      ( MADDEN.SUE )
TO:  KARLA RICHARDSON @STO                ( RICHARDSON.KARLA )
TO:  Gerry Goeke @STO                     ( GOEKE.GERRY )
TO:  Patti Donovan @STO                   ( DONOVAN.PATTI )
TO:  Marvin Johnson @STO                  ( JOHNSON.MARVIN )
TO:  ROGER RIEMANN @STO                   ( RIEMANN.ROGER )
TO:  BILL HAYES                           ( HAYES.BILL )
TO:  HAL HERWECK @STO                     ( HERWECK.HAL )
 
    

    The direction Digital is moving towards regarding the deployment of
    Sales Support (SE's) looks suspiciously like the model HP has today.
    
    Al
    

Re:.28

Maybe a brief rathole,but we've been following this HP model as articulated in
.-1 for the last 2 years here. An unmitigated disaster for Digital.

Most (software) products we produce require significant,knowledgable presales
effort upfront to deploy successfully. Presales get mixed into a service
centre to get critical mass, and all the metrics switch to generating
consultancy projects. Sales don't like having to fork out $$$ each time,
don't like the hassle of finding the people needed unless there is a sizable,
recognisable opportunity... and one large consultancy win wipes out all your
good presales expertise as well.

Sales of the key products goes down the tubes -- and would you believe it,
99% of their opportunity for consultancy is on the back of previous product
sales. You're then into the spiral down.

This fiscal, we slashed the price of VMS to UNIX competitive levels to keep
our platform volumes up. But while System and related infrastructure software
has sold in proportion to the much greater CPU volumes, the Office and
COHESION business halved in 12 months. This doesn't bode well for our
future.

We've started appointing 3rd party sales agents to fill some of the gaps. We
also have a very small SW specialist salesforce with even smaller dedicated
presales support for FY94... who will only use the Service centres for
customer paid presales work (Office Analysis and Planning, etc). Meanwhile,
while the SW business is being cash cowed to provide the add-on and SPS
revenue for MCS FY94, the investments are being tilted towards SI or to
advertising spend for the components/PCs side of the house.

A lot of the problem is a symptom of the "middle ground" nature of the SW
products we engineer while the overall market has polarised. I certainly
hope our Quality System will link in with that of engineering much sooner
than I expect it to...
								- Ian W.

    Maybe we should be recruiting HP executives instead of IBM execs for
    Digital senior positions 8^)
    
    Mark
    

re:.27

Did I miss something?   The title is "Why HP moved ahead financially"
while the contents are a critique of the HP sales and software 
support model.  That critique, by the way, suggests that HP and DEC
have many of the same problems (so perhaps HP's success is due
to something else).

re: .29

>A lot of the problem is a symptom of the "middle ground" nature of the SW
>products we engineer while the overall market has polarised. I certainly
>hope our Quality System will link in with that of engineering much sooner
>than I expect it to...

Ian,

Could you please elaborate on this (perhaps in a separate note)?
We hear about middleware being the place to be, partially because
we have skills there, and partially because we believe that we can
get some account control if we succeed there.  Or maybe it's because
we believe there's only room for one middle-ware vendor (just as there's
really only room for one DOS vendor), and we want to be it.

As for Quality System, it sounds like you're talking about something
formal.  I'm not sure what it might be, unless it's a result of the
Achieving Engineering Excellence program.

   Gary

    re:.31
    
    Part of the reason that HP moved ahead financially is that they have 
    a lower cost of selling, general and administration costs than Digital 
    does.  Digital's are unusually high.  One of the reasons that Sales 
    Support is being moved back into PSS is to lower the cost of Sales by 
    billing for technical support which has been given away in the past.
    
    With some of the strategies identified in .27 (discouraging use of
    Sales Support, difficultly in getting equipment, software, manuals,
    etc.) it's easy to see why their costs are lower, but it's more
    stressfull for the employees.
    
    How does HP's customer satisfaction compare to Digital's?
    
    Patti

    re:.32
    
    I always find it interesting that SG&A usually get described as
    "cost of Sales".  Because that usually brings out an assumption that
    "sales" is costing DEC too much.  What I would like to know is what 
    is the cost of G&A as well as the "corporate contribution", which 
    I call a tax, that is part of the P&L?
    
    How far inward does G&A extend?  To manufacturing? or is it just 
    "sales" G&A? If I am not mistaken, there is a specific cost (line item)
    for each piece of SG&A.  Just wondering.
    
    MP

    The costs that can be allocated to specific units of goods sold (raw
    materials, labor, etc.) show up on the line "Costs of product sales,
    service and other revenues".  So (in theory) this number is directly
    related to the costs of creating the things that were sold.
    
    "Selling, general, and administrative expenses" are the costs not
    allocated to "Costs of product sales" and "Research and engineering
    expense".
    
    Once again, in theory, if a company could sell their products (totally)
    through a drive-up window in the factory, then the SG&A costs would be
    the salary of the person staffing that drive-up window.

    I've always wondered:  do "allowances" get added to the cost of sales? 
    When we give a customer an "allowance", it's usually a discount to help
    move something against a competitor's equivalent offerring at a lower
    price.  I've always suspected this gets lumped into "cost of sales" to
    reflect the sales force's "inability to sell our value added."  The
    problem is that the product line is thereby insulated from competitive
    reality:  they show full price for what was sold, and it's the sales
    force that shows the loss.  I hope somebody tells me I'm mistaken on
    this...

    
    re. .35 Cost of Goods Sold is in fact reduced by Purchase Returns and
    Allowances, AND Purchase Discounts. So ultimately Net Income is reduced
    by the discounts given. These discounts can be a result of price
    competition, or "the sales force's inability to sell our value added".
    IMHO, I believe the discounts are a result of price competition.
    
    	Please feel free to correct this if it is in error.
    
    			fred deady

re Note 2501.31 by TLE::TOKLAS::FELDMAN:

> re: .29
> 
> >A lot of the problem is a symptom of the "middle ground" nature of the SW
> >products we engineer while the overall market has polarised. I certainly
> >hope our Quality System will link in with that of engineering much sooner
> >than I expect it to...
> 
> Ian,
> 
> Could you please elaborate on this (perhaps in a separate note)?
> We hear about middleware being the place to be, partially because
> we have skills there, and partially because we believe that we can
> get some account control if we succeed there.  Or maybe it's because
> we believe there's only room for one middle-ware vendor (just as there's
> really only room for one DOS vendor), and we want to be it.
  
        I worry sometimes that we (Digital) are like the drunk who
        searches for his lost key at night by a lamp post, even
        though he doesn't think he lost his key there, "because the
        light is better".

        Bob

    re: .35, .36
    
    Allowances and discounts are, if I'm not mistaken, purely an internal
    matter. Our financial statement is not the funny money sort of thing you 
    got with NMS.  Expenses are real expenses. Revenues are real revenues.  
    If it cost us $1 to make it, $1 to sell it and we got $3 from the 
    customer, we made a $1 profit.  Even if the list price was $100.
    
    One thing I've heard often from those who should know is that of the
    ~34% SG&A expense, only 14% is the direct sales force.  God knows where 
    the other 20% goes.
    
    Al
    

    
    Re "middle ground"
    
    A friend who works in the food industry once told me that you have to
    clearly differentiate your products in order to be successful. The two most
    common ways to differentiate your products are to be the cheapest
    (regardless of quality) or the best (regardless of cost). All others tend
    to get lumped into a "middle ground", where it is hard to clearly
    differentiate your products, and just as hard to maintain a foothold in
    the market.
    
    I suspect this also applies to the computer industry. When DEC had the
    best minicomputers or the best networking, it was successful. If we are
    to be a software company, we need the best software to be successful
    (or the cheapest :-| )
    
    

    To help set a few items straight in the last few replies:
    . There is no attempt to account for discounts or allowances as a
    method to track if sales can properly sell value. The ONLY number that
    matters, or shows up on a P&L, is NOR - Net Operating Revenue. NOR
    equals the bottom right corner (or wherever it is) of the invoice. How
    much the customers owe us. Allowances are in fact given for a number of
    different reasons - everything from the product was not priced
    competitively in the first place to someone in manufacturing messed up
    and caused the customer to incur an expense. And sometimes sales is
    responsible too. 
    
    . SG&A is comprised of selling expense - the cost of the sales force,
    sales support, and management AND marketing expenses. Marketing can
    exist at a country level and at a corporate level. SG&A includes
    charges for Professional Services development, support, and marketing
    at both a country and corporate level. SG&A includes certain overhead
    charges for logistics and corporate expenses. While it will vary a bit
    by territory, Selling Expense, as opposed to SG&A, will run around 18%
    (this includes sales and support).
    
    It is relatively easy to dismiss SG&A as being too high until you begin
    to try to actually remove the various items which comprise it. And you
    find that many, many of them we simply can not do without.
    
    This is NOT simply a problem of bloated overhead. Lots and lots and
    lots of little pieces in lots of parts of the company go into the
    problem. That's why it's tough to solve.

    rep. .40
    
    My point exactly in .33.  SG&A is made up of many fixed and variable 
    costs that are not "necessarily" related to sales.  That is why I asked
    the question.  It seems that many misperceptions are brought about when
    looking at the "numbers" without knowing what is behind them. i.e.
    "sales expense too high"
    
    mp

Just a short note and if this is contentious, i'll need to move it to a new
note.

We're successful, in industry volume terms, at operating systems and NaC 
software. If you class that as middleware, i'd agree.

However, the engineering definition seems to relate to "frameworks" or "NAS",
at which (from a product sales point of view) we've been unmitigated failures.
We're not even sure of what problems we're trying to solve, or whether we
have the product functionality to deliver what we say we can do.

The comment about our Quality System is a formal one. Our MQA Quality Manual
is in for approval, subject to a formal assessment and then onwards toward
TQM (miles away). We want to link the chain back to engineering, and be able
to demonstrate that we produce products to address customer needs/desires or
problems. Engineering is currently upstream from us and largely unconnected
in any formal way (bar the excellent work that Gary's done with us).

In the meantime, i've recently winced at Bob Palmer saying that our software
added value is in Frameworks and Emerging Technologies. This sounds like
folks get disinterested whenever life outside gets competitive. I hope this
impression is incorrect.
								- Ian W.

    May 24, page 66 of EE Times posts the following info about Digital and HP 
    that may add value to the discussion here.  Rank has to do with number
    of employees.  Revenue is for FY92 where Digital's year ended 6/92 and
    HP's ended 10/92 and is in $M:
    
    Rank:1993	Name	Employees:1993	Rank:1992 Employees:1992 Revenue:1992
    
    15		Digital	98,100		12	  116,000	 14,027
    16		HP	93,100		20	  89,700	 16,427
    
    
    HP had revenue that was about $2B above Digital's.  HP has 5000 fewer employees 
    than Digital.  One interesting way to look at it is that the difference
    of 5000 employees corresponds to $2B difference in revenue at a rate of
    about $400K per employee.  So ...
    
    The obvious way for Digital to quickly compare favorably with HP is to 
    immediately identify and lay off 5000 Deccies each making about $400K ...
    ;^)
    
    Steve 

    
    Re: .-1   > The obvious way for Digital to quickly compare favorably
              > with HP is to immediately identify and lay off 5000 Deccies 
              > each making about $400K ...  
    
    
    Change "making" to "costing" and you'll get the strategy wished for by
    many authors in this file:  Dump upper/middle management!
    
    

RE: .42:

We're successful, in industry volume terms, at operating systems and NaC 
software. If you class that as middleware, i'd agree.

	Ian --

	I think a more correct statement is that we *were* successful in those
	areas.  It's not at all clear to me that we still are, at least in the
	eyes of the computer industry as a whole:

		1) Operating Systems

			VMS 	-- clearly not a future growth industry
			OSF/1	-- we still have a long way to go to have
				   credibility in the UNIX space.  I'm not
				   convinced that the world will embrace 
				   Digital's OSF/1 in the volumes we'd like to 
				   see.
			NT	-- we don't own it, so it's hard to say we're
				   successful in it (although we certainly have
				   a lot of engineering expertise in it).  But
				   we're virtually betting the company on its
				   success on Alpha.
			Novell	-- the new O/S on our Alpha block.  
				   We don't own it, either.

		2) NaC

			We have missed the PC network revolution.  While we
			have good products, we constantly hear from the field
			and *our* customers (let alone any future ones) that
			we must support the dominant network vendors' offerings
			in order to sell our products.  The field is very clear
			in telling us that layering on PathWorks, with PathWorks
			supporting those dominant vendors is not what customers
			are demanding.  They want native support.  
			(And yes, I hear that PathWorks is selling very well;  
			it's just that we have such a small penetration in the 
			PC network area, compared with Novell, et. al.)

	Lest the wrong impressions be imparted, let me be clear that the above
	comments have nothing to do with the technical quality of our offerings.
	I am in no way slamming our engineering groups, or their technical
	abilities.

	And I would love to see things turn around, and have Digital become
	successful in these areas (or others) again.

	Bryan

re Note 2501.42 by IW::WARING:

> In the meantime, i've recently winced at Bob Palmer saying that our software
> added value is in Frameworks and Emerging Technologies. This sounds like
> folks get disinterested whenever life outside gets competitive. I hope this
> impression is incorrect.
  
        We certainly act like we're trying (in most areas -- NOT true
        in CPU chips) to run from where the action is.

        Bob

    Hi,
    
    Methinks there is some confusion - probably mine!
    
    "Middleware" and "Frameworks" can be seen to be the same thing.
    
    From my perspective (Account Consultant), selling "middleware" out of a
    catalogue is not cost-effective.  This is because the time spent
    selling the s/w would make more revenue if aimed at systems - and I
    leave the margin debate to another time.  This seems to be the same for
    all s/w - especially now that the revenue/person goals are increasing.
    
    An approach that excites me with its potential is to sell the
    middleware as a by-product of consultancy - specifically the CSDA
    (Client Server Distributed Architecture).  CSDA, together with its
    complementary technolgy - Frame Based Environment (DECfbe), has the
    potential of enabling my customer to realise the potential of their
    significant investment in IT over the past 40-ish years and to enable
    future investments to be very cost-effective.
    
    I agree that a $100K consultancy package allied with $30K s/w licenses
    is not "mega-bucks".  However, this opens the door to further
    consultancy, s/w engineering projects and allows us to sell in our
    "best in class" systems as the money becomes released and IT is clearly
    perceived as supporting businesses.
    
    A great example of what can be done with this consultancy can be found
    within Digital.  Using these techniques has enabled Digital to identify
    ways of slashing the cost of our supply chain, improving its
    effectiveness and propelling us towards being best in class. 
    Implementation is well under way and has proved the concepts.
    
    Customers are also interested in this and I know that there are a
    number of significant customers who are very excited at what Digital
    can do for them.  The UK Ministry of Defence (my Account) is just one.
    
    So - selling s/w using current account teams does not seem the best way
    - I suggest that we use consultancy to lever not only s/w but also our
    systems.
    
    regards
    
    Chris
    

	re .47:

>    This is because the time spent
>    selling the s/w would make more revenue if aimed at systems - and I
>    leave the margin debate to another time.

	Chris, you know I have great respect for you as a person, and
	for your skills and experience in your job.

	But - don't you think that one of the main reasons this company
	is in the situation it is in today is precisely that too many
	people have been "leaving the margin debate to another time"?

	Digital turned over $14.9 billion last year, and made a small loss.
	Microsoft turned over $2.8 billion and made nearly $700 million
	profit. A contrast, eh? If only we had the same advantages!

	In fact, we do. Digital's software business has
	revenue, margins and profitability very similar to Microsoft,
	and not all that much different in numbers either. The difference
	is that Microsoft focusses all the wood behind one arrowhead -	
	profitable software - and is growing it rapidly, whereas the
	Digital software business is dragged down by subsidising the
	rest of the company and is consequently not in nearly such good
	shape.

	Can you imagine Microsoft hacking down its software engineering
	budgets, perhaps canning Word for Windows and Excel, paying for
	advertisements to tell the world how Paradox, Superbase, etc
	are available on Windows (and not mentioning Access), and
	systematically rightsizing the people who sell its software
	products? All it would then have to do to be like Digital
	would be to acquire a seriously unprofitable $12 billion company.

	/Tom

    I can believe that some people think that Digital's lack on
    concentration on margin is the heart of the problem.  I can't believe
    that there's a consensus on that.
    
    I believe that Digital's problem was a failure to concentrate on
    building volume and marketshare.  That could have saved Digital in '90
    and '91.
    
    The right product mix and marketing strategy could have supported
    Digital's growth in revenue and marketshare and growth would have
    spared us the layoffs and lifted the stock price as well.

(From Dow Jones News Service)

No. 2 computer maker Digital Equipment Corp. (DEC) appears to be turning
around ahead of IBM.

Analysts say Digital is likely to report its first profit in eight quarters
for the June period, its fiscal fourth quarter. Shao Wang, an analyst with
Smith Barney Harris Upham & Co., expects earnings per share of $1 to $1.25,
compared to a net loss of $1.85 billion, or $14.76 a share, after a $1.5
billion restructuring charge.

''They've done a good job cutting costs,'' Wang says. ''The real story here
is revenue.'' He predicts revenue for the quarter will rise to $3.96 billion
from $3.91 billion a year ago.

Other analysts are less optimistic, with some estimates of quarterly
earnings as low as 40 cents a share.

Stevens of Dean Witter recently cut his earnings estimate for the quarter to
99 cents a share from $1.19 and expects revenue to be down to $3.8 billion.
Stevens expects Digital to stay in the black and be profitable in every
quarter of fiscal 1994.

Hewlett-Packard Co. (HWP), whose fiscal third quarter ends July 31, is
likely to continue to report robust growth. But even Hewlett has recently
disappointed investors.

Last month, the company said European weakness had led to order growth
slowing to under 20% from 25% in the previous quarter, foreshadowing a
possible sequential decline in sales.

Still, Wang of Smith Barney says, ''it remains the admired exception'' to
the industry malaise.

For Hewlett's fiscal third quarter, Wang predicts net will rise 71% to $1.30
a share from $191 million or 76 cents a share in the same period last year.
Other analysts are closer to $1.15 a share.

Wang predicts Hewlett's sales will rise 20% to $4.8 billion. Such sales
growth could catapult it past Digital to the No. 2 spot in computer industry
revenue, after excluding about 18% of revenues coming from medical products
and instruments.

    Just for chuckles, and to again compare how HP is doing against
    Digital, here are their FY94 revenues:
    
    Computer Products = $19.6B (+26%)
    
      Printers       =  $8.0B (+57%)
      UNIX           =  $5.5B (+31%)
       [servers   =  $2.9B]
       [Wkstions  =  $2.6B]
      MPE            =  $1.0B (-47%)
      PCs            =  $1.2B (+56%)
      Services       =  $2.5B (-23%)
      X-Terminals    =  $ .2B
      Other/Perip    =  $1.2B
    
    Electronic Test & Measurement = $2.7B (+17%)
    Medical Electronic Equipment  = $1.1B (-5%)
    Analytical Instruments        = $ .7B (+7%)
    Electronic Components         = $ .7B (+23%)
    
    Total FY94 Revenue  = $24.99B (+20%)
    
    Mark