Conference 7.286::digital

	Then there's all those allowances.........

	sell the hardware, get the certs, and allowance the consultancy


	Heather

    Re .1
    
    We've had this discussion before I believe in DIGITAL_INVESTING. The
    conclusion was that DISCOUNTS and ALLOWANCES came off of revenue ie
    revenue is reported after discounts and allowances have been factored
    in. Discounts and allowances are not treated as expenses.
    
    Dave

    I read the "breakfast notes" differently, it is a long list of Finance
    function failures. And the big bottom line, they will have to do more
    ( monthly closings) with less people and hopefully less different
    accounting systems. I suspect that "bean counters" saved the company is
    just an observation that in a world where everybody lost any sense of
    what things cost and what are the gains, the finance function was last
    to lose the head. Not so surprising, they had to add up all the
    expensive errors. So, they sort of did not have equal chance to screw
    things up, although they did some sincere attempts, like sevaral assets
    mismanagement systems. 

    And here comes the killer, the fat raises. 

    Lets say a finance guy comes one day and says , "Boss, if we write 
    off the books all these forgotten assets and powered down computers and 
    all the other stuff that we simply can't find anymore, we pay less
    taxes and books will look great." 

    The Boss can do two things, praise the messenger of good news or sue
    his assets missmanager.  The breakfast memo seem to imply that Digital
    will do both.

    		I really like the idea that some of us are waking up
    to the fact that we have already done our part in the Cost of Goods
    Selling and R & D expending.    Now it is up to our top management
    to show their leadership regarding the still bloated G & A expenses.
    
    		In a recent breakfast meeting Palmer quoted what we all
    have known for years, that Selling G & A expenses are over 30% of
    our revenues.   This has been true since 1983 when I joined DEC 
    (probably even before that).     Now the real issue is if we are going
    7,000 more employees down by the end of June, they should be G & A
    related.    Our top management has commited to Wall-Street and us
    that Selling G & A has to go down to 15% to 20%.    So far top
    management is doing it by severely reducing our sales/service part
    of this equations.
    
    		The tough question is: When are we going to start getting
                                       TFSO to the G & A part ??????

    Re .4
    
    Don't confuse "Cost of Goods Sold" expense with "Selling" expense.
    "Cost of goods sold" is basically manufacturing costs and is not part
    of SG&A. "Selling" expense is. As you say "Selling" expense (sales and
    sales support reps) has been whacked hard. I absolutely agree that it
    is now the turn of the blood suckers in G&A. Personnel to the front of
    the line please, followed closely by the law department.
    
    Dave

    Re .5
    
    	>>>>> Personnel to the front of the line, please.
    
    
    	Yes !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
    
    		Cost of Goods -> What I was trying to say is that
    manufacturing, engineering, sales, service and the field have been
    severely affected during the last three (3) years of lay-offs, now is
    the turn for the BIG 'blood suckers',   Where is the value added,
    can someone answer ??????????????????????????????????

    
    re .6 -- don't understand your point.
    
    Are you querying why a CBU would want to be represented at the largest
    international trade show in their segment? Is your point related to the
    fact that our principal competitor has withdrawn from the Paris show, 
    leaving the access to potential multi-vendor clients wide open?
    
    Colin

    >>Can anyone supply the pay range for a Consultant (SRI 40-42, I
    >>believe).
    
    Ken, perhaps you should do your homework before you attempt to malign
    the personnel organization or the people in it.  It seems obvious from
    your comment that you have little real knowledge of the organization.
    
    There are 4 levels of personnel consultants ranging from SRI 36 to 41.
    Very few of them are positioned at the high end of the SRIs.
    
    As for your anecdote regarding the person who spent two years writing
    an addenda to the Orange Book, it must be nice work (if you can get it)
    to spend one's time monitoring the activities of others.
    
    Laura

Laura -

Actually. I worked in Personnel for several years. I know whereof I speak.
    
Let's just say that I was assigned to "assist" with this project and as a 
result worked with this individual for some months. Please believe me when 
I say that I voiced my concern at the time about the time being spent on 
this project, and on Personnel's inability to make a decision regarding 
what it should look like when it was completed. Having voiced my concern, 
I was told that I was "politically insensitive" and to keep quiet 
    (definitely not the forerunner of Employee Involvement). 
                                               
Regards,

ken
    
    

    Ken,
    
    Thanks for the clarification.  However, your data about SRIs was/is
    incorrect.
    
    Laura

	re .0:

>	And even Hindle's stuff
>       costs us over $12M. Expensive job watching over those ethics.

	Obviously top management is determined that Digital will have
	the best ethics that money can buy.

	As an interesting comparison, let us reflect that the Queen
	of England receives an annual budget, known as the Civil List,
	which in 1989 amounted to �5.5 million. Assuming it hasn't
	changed much, that is about $8.25 million. That pays for all
	the Royal Family's official duties (the Queen herself gets
	about 80% of it, the balance goes to the Duke of Edinburgh, the
	Queen Mother, and the other family members who perform official
	duties).

	Given the reasonable starting point that Digital's Office of
	Ethics is more important and accomplishes more than the British
	Royal Family, it is probably natural that it should have a
	budget which is nearly 50% higher.

	As to the Controller's $304 million, I don't even dare ask.
	I just know the software marketing campaign some of us have
	been trying to run in Europe went down the tubes for want of
	less than $1 million, and some priceless PC software development
	products were cancelled for want of one or two engineers, costing
	about $100,000 a year each.

	/Tom

	The civil list has been cut, and many people who carry out royal
	duties are now funded by the Queen, not the Civil list.

	I also think the Queen does an excellent job for tourism.

	Heather

Copyright � 1993 Dow Jones & Co. from DJ International Economic News Wire
Probe Found Digital Equip, Oracle Gave Officials Gifts


ALBANY, N.Y. -(AP-DJ)-- An investigator said computer companies doing
business with New York treated state officials with the power to decide on
contracts to dinners, football games and a Grateful Dead concert. 

Inspector General Joseph Spinelli said officials in the state's mental
hygiene and substance abuses agencies 'seriously compromised' their
objectivity in accepting gifts from Digital Equipment Corp. (DEC) and Oracle
Corp. (ORCL). 

Fifteen state officials were involved, Spinelli said. More than 13,000 dlrs
worth of entertainment expenses for state workers were paid between 1988 and
1992 by Digital, with a lesser amount by Oracle. 

The officials involved were responsible for recommending or approving more
than 10 million dlrs worth of computer equipment purchases from Digital and
more than 1 million dlrs from Oracle, he said. 

Spinelli said he found no evidence of a 'quid pro quo' relationship, but he
didn't like the appearance. 

The case has been referred to the state Ethics Commission. Prosecutors
haven't been contacted, but the possibility is still open, Spinelli
spokesman Stephen Del Giacco said. 

(END) AP-DOW JONES NEWS 06-28-93

2057GMT

    
    	re. .15
    
    	I hope Win's Ethic's Office has an answer for this!
    
    
    		fred deady

    
    re: .15.
    
    
    HAHAHAHAHAHAHAHAHAHAHA!  I'm sorry, but the thought of politicians
    being investigated after being treated to a Grateful Dead concert 
    by computer company salespeople just absolutely cracks me up.
    
    What would Jerry think if he knew?
    
    Do you think they went in multi-colored limos?
    
    Glenn

>Fifteen state officials were involved, Spinelli said. More than 13,000 dlrs
>worth of entertainment expenses for state workers were paid between 1988 and
>1992 by Digital, with a lesser amount by Oracle. 

	so that's where the budget money for Canobie Lake went!

$13k over 4 years is nothing for a sales team to spend 'wining and dining'
the decision makers from a top account.  IBM probably spent twice that but
we get the publicity cause we got the business...

re .20:

>$13k over 4 years is nothing ...

No, it's $13k ... and it's also illegal in every government contact I've ever
known of.

>the decision makers from a top account.  IBM probably spent twice that but
>we get the publicity cause we got the business...

This is unsubstantiated heresay but assuming it is even remotely true, they
should get raked over the coals with everyone else.

grrrrrr ...

Bob

    SG&A stands for Sales, plus general and administrative, right? I used
    to work for a different company with their sales force. I also spent
    two years in the field for Digital. The other company salespeople spent
    more than Digital's. They took customers out for more meals and to
    better places. They gave out more trinkets. In just about every way
    the salespeople at this other company spent more through their sales
    people. But when the end of year results came out there was no big
    problem with SG&A being too high.

    The conclusion I've come to is that our problem with SG&A is *not* with
    the sales force. But that appears to be where we're cutting first and
    deepest. Is this observation correct? Why is this and why should it
    make me hopeful?

    			Alfred

>    The conclusion I've come to is that our problem with SG&A is *not* with
>    the sales force. But that appears to be where we're cutting first and
>    deepest. Is this observation correct? Why is this and why should it
>    make me hopeful?


	Sales were one of the last to start cuts, other G+A areas of the
	company here started 3 years ago, and are still continuing.

	Heather

>	Sales were one of the last to start cuts, other G+A areas of the
>	company here started 3 years ago, and are still continuing.

	Frankly, that does not appear to be the case in the US. Second, are
	there real indications that our sales spending numbers are out of line
	with the other computer companies?

			Alfred

    There's never been a breakdown available to me of expenses attrbuted to
    sales reps and expenses attributed to headquarters and overhead.
    
    From my perspective, Digital sales reps' discretionary expenses seem to
    be at the same level or less that those of other companies with a
    direct sales force.
    
    Pat Sweeney

    re .last, example:
    Compaq's SG&A: 11% of revenue
    Digital's SG&A: 30%+ of revenue
    
    Slightly different business models, but to most customer's eyes we
    essentially sell the same solution.  Digital just requires an army
    to do it. 

    Now that's really to the heart of the problem.
    
    If Digital sees itself as a Intel-like manufacturer of chips, and a
    Compaq-like manufacturer of computer systems, then it doesn't need a
    large direct sales force.
    
    If Digital sees itself as a EDS-like systems integrator, then it does
    need a large direct sales force.

  Why don't we break the SG&A expense line into two, Selling and G&A?
  Is it too hard to do? If so, What could be the reasons? 

Avinash

    Wny isn't there more detail?
    
    Digital's external financial disclosures, like most companies of its
    size, are the mimimum required by law.

    That's true Pat, but no one seems able or willing to break it out for
    internal use, either.
    
    \dave

    
    
      I've been wondering about why the "SG&A"  numbers never decrease
    also,  and have come up with a theory.
    
      DEC has been on a buying spree for the last few years and has
    bought several companies.  I don't know anything about financial
    stuff, but is it possible that  the "G&A" expenses from all these
    new acquisitions is what's making the "corporate" number seem
    so high?  (I.E.  Do the added expenses from the acquired companies
    offset personnell cuts in this area?)  Also,   when I look at the
    balance sheet,  I never see numbers representing things like
    the  purchase of Olivetti stock which was announced a while
    back.   Would that also be part of the  G&A line item?
    
    
    							-al
    

    re: .27
    
    >>If Digital sees itself as a EDS-like systems integrator, then it does
    >>need a large direct sales force.
    
    But not, I submit, the kind of sales force we have today.  EDS has less
    of a sales force than it does a consulting force that sells in that many 
    of those who sell do (or at least have done!) the kind of work EDS
    sells. With *very* few exceptions, Digital sales people do not have the
    experience or training to sell SI business and Digital does not have
    the processes in place to get "opportunity managers" who may have the
    experience into the loop soon enough into the sales cycle".
    
    Some other differences of the model that are worth noting are that
    EDS has an army of relatively low paid EDS employees to do the massive
    amounts of finicky technical grunt work found in every systems
    integration project that Digital "contracts out" to body shops. Those
    body shops are making money that could be ours.
                                                               

    re .30
    Equity ownership of Olivetti is NOT an expense. It is a balance sheet
    item.
    SG&A includes many, many expenses that are only peripherally related to
    the expense of actually securing an order. 

    The issue of whether or not the direct sales force we got is the direct
    sales force that we need is one of the top five issues confronting
    Digital today.
    
    It's far more important that understanding the formal accounting
    entries for the acquistions of Philips ISD and Mannesmann-Kienzle
    which are explained in footnote O of the 1992 Annual Report.