Conference 7.286::digital

    Mike:
    
    In order for there to be an employee owned takeover, the employees need
    to get organized (not unionized) and select a team to guide it thru the
    process with an investment banking firm.  Existing employees would then
    receive a soliticitation to buy shares at $ X per share.  Once this
    goal was achieved, we could put our own BoD and select our own SLT,
    CEO, CFO,etc.   
    
    Not an easy task but I wonder just how much interest there would be in
    this kind of endeavor.  
    
    I for one would be if I had a say in how things were going to be done.

    Me too, lots of interest. 
    
    Wonder if Lee I. would be interested in taking a computer firm on, and 
    getting some government guarenteed loans, we would then pay him $1.00 
    per year until we were profitable again.  
    
    Imagine a 'k' computer.  
    
    Dave

I just want to set the record straight on something: my interest in an
employee buyout has nothing to do with wanting to decide how things are
done in this company, least of all with respect to layoffs. If I
thought for an instant that Bob Palmer wasn't doing his absolute best
for Digital's long-term health (= my job security), I would be long
gone. Likewise, if I thought that an employee buyout might result in
some scheme to "guarantee job security" at the expense of financial
health, I'd take the money and run (and I'm sure I wouldn't beat
Palmer, Steul, and Lucente to the door). My interest is in avoiding a
takeover by someone whose sole interest is in selling us off for parts.
I wouldn't have a nanosecond of job security in that case.

    How many shares are outstanding?
    What's the current share price?
    Can we get a loan?
    
    
    				-- edp
    
    
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>    How many shares are outstanding?

roughly 1,361,210,000 (using $72,144,000 loss and .53 loss per share)

>    What's the current share price?

around $30

>    Can we get a loan?

$40,830,000,000, but who's gonna co-sign it?  What about the DCU?

Dave :-)

    re -1
    Check your math

	The Q2 report states that we have 136,028,383 "weighted shares
	outstanding."

	Roy

    
    I'm getting $452.00 back from my life insurance "overpayment".
    I'll throw it in the pot. :-)
    
    Glenn

    136,000,000 shares at about $35 apiece divided among 80,000 employees
    is $60,000 per employee.  Or $30,000 each just to get a majority stake
    in the company.  Even with a loan to reduce that amount, could we get
    enough employees to buy in?
    
    
    				-- edp
    
    
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re Note 2871.5 by OASS::STDBKR::Burden_d:

> $40,830,000,000, but who's gonna co-sign it?  What about the DCU?
  
        That way we'd ALL be "relationship members"!

You don't need 51% to have controlling interest.

    some would call it mutiny. but if you lose any faith in the leardership
    sometimes its not only an alternative, but a desirable one.

>    some would call it mutiny. but if you lose any faith in the leardership
>    sometimes its not only an alternative, but a desirable one.

Let me reiterate: the purpose of an employee buyout is *not* to effect a change
in leadership, but to protect the company against a hostile takeover whose
purpose is to liquidate the assets (and put *all* of us out of jobs). It's also
hoped that, in the bargain, there might be some profit involved. A "mutiny"
would probably result in disaster, and in any case, would be unlikely to gain
the support needed from the investment community to raise the capital needed to
buy back publicly held stock.

Typically, an employee takeover would be instigated, guided, and executed by
some already-senior officers. In case it's not obvious, the officers of this
company are employees.

    All the calculations seem to be based on number of shares multiplied by
    the current share price.Neither is accurate.In a buyout,or in the
    run-up to it,the company would be revalued and arguably would be worth
    less than the above calculation.I suspect tha amount needed would be
    limited to around 8 billion dollars-of which employees would need to
    find an extremely limited amount.The financing would come from someone
    betting on breaking up the company.
    Still-less of this talk.
    

    re: .14
>financing would come from someone
>betting on breaking up the company.
    
    	I don't think this is what Mike was suggesting. The point of an
    employee buyout is that the employees could determine if the company
    would be broken up or not. Even if you take a loan to buy a car, the
    person giving the loan doesn't expect to tell you where to drive it.

    Re: .13
    
    
    > Let me reiterate: the purpose of an employee buyout is *not* to effect
    > a change in leadership ...
    
    Precisely, so how could Digital possibly benefit by an employee
    buyout. 
    
    
    Steve
    
    

>  <<< Note 2871.13 by MICROW::GLANTZ "Mike @TAY 227-4299 TP Eng Littleton" >>>

> Let me reiterate: the purpose of an employee buyout is *not* to effect a change
> in leadership, but to protect the company against a hostile takeover whose
> purpose is to liquidate the assets (and put *all* of us out of jobs). 

Are you talking about taking the company private or just buying and 
holding a controlling share?

If the former, the buyout would have to be total, buying up virtually all of
the outstanding shares so that ownership is no longer covered by SEC rules
that apply to public trading.

If the latter, who owns and controls the controlling share?
Do we form a holding company, and who owns shares in THAT enterprise?
Is the holding company privately held, controlling a controlling share
in an otherwise public corporation?

Avis and TWA were noted as employee owned companies, and United Airlines
is apparently going that route.
What financial organization did those companies use?

You can't prevent a takeover if shares can be publicly traded.
How can you hold a confederation of employees together, all of whom agree not
to sell, when someone bids up the price and entices each employee with personal
gain?
Contrary to an earlier reply, takeover bids tend to RAISE the price 
of the stock, not depress it.  It is a bidding war, after all, the idea being
that if you want it all, you'll be held over the barrel to pay for it.

- tom]

> Are you talking about taking the company private

Yes.

All of the rest of your questions are the same ones I'm interested in
answers to.

> Avis and TWA were noted as employee owned companies, and United Airlines
> is apparently going that route.
> What financial organization did those companies use?

Exactly what I'd like to know. Anyone know how these were handled?
Feasible or desirable in Digital's case?

> so how could Digital possibly benefit by an employee
> buyout.

Digital as a corporate entity wouldn't necessarily benefit from an
employee buyout. The employees would benefit, because there would be
some insurance that the company wouldn't be sold off. But as far as the
corporate entity is concerned, I'm not sure that it would make much
difference. Unless, of course, a change in management direction
resulted in better or worse performance. I'm assuming that change in
management is not the point. The change I noted in the behavior of TWA
I attribute not so much to a change in management, as to a change in
employee attitudes.

    
    Re: .19
    
    I guess you missed my point.  Unless the leadership changes
    significantly, protecting ourselves from a buyout is a waste of
    time.  We're on our way out of business without some significant
    changes.
    
    STeve
    

I didn't miss your point, I chose to ignore it. It's an opinion which
has been restated many times, by many people, in virtually every topic
in this conference. I don't happen to share it.

This discussion is about the mechanics of an employee buyout of a
company, not the merits or failings of the current officers.

    So, there are 136,028,383 shares outstanding, and we need 51% to
    ensure we control the company - 69,374,475 shares. Any idea how
    many are already owned by employees? Could we possibly include
    retirees in this? Some of them still have stock in the company.
    That would reduce even further the number of shares we'd need to
    purchase.
    
    I don't know what others see as the biggest benefit to being 
    employee-owned, but for me it would be that we wouldn't have to
    worry about Wall Street's reaction to each and everything we do.
    The company could stop concentrating on this quarter's statement
    and concentrate on the long range - staying in business forever -
    and set about doing what is necessary to accomplish that. 

re: .22

In order not to worry about Wall Street you would really need to take
the company private.

Even if you went private, you'd still have to worry about Wall Street if you
ever had to borrow money.

>    So, there are 136,028,383 shares outstanding, and we need 51% to
>    ensure we control the company - 69,374,475 shares. Any idea how
>    many are already owned by employees? Could we possibly include
>    retirees in this? Some of them still have stock in the company.
>    That would reduce even further the number of shares we'd need to
>    purchase.
    
....missing, it seems, the necessary question of how many of the employees
and retirees who own these shares WANT the company
to be private, public, employee-owned, or whatever.
And how many even CARE?

A guess:  only half care at all, and probably fewer (far fewer?)
than half of that half would be at all eager to involve or commit 
themselves to an employee buyout.

- tom]

    I dont know, but if employees take it private, would't Ken Olsen have
    one of the largest portfolio of DEC Stock?  If so, would'nt that make
    him eligible to sit on the Board???
    
    Just speculation...
    
    KO

>Let me reiterate: the purpose of an employee buyout is *not* to effect a change
>in leadership, but to protect the company against a hostile takeover whose
    
    It depends, doesn't it?  For instance, in the case of United Airlines,
    one of the purposes, most definitely, was to change the leadership.  In
    fact, contrary to the hype he is currently spouting, removing Steven
    Wolf as chairman was one of the key reasons for the ESOP.  It was also
    a condition of the agreement.
    
    -jer

    anyone check the stock program recently?
    
    DEC 199 1/2, change +160; DJIA 3940.00, change +0.00 at 12:00.
    Report entered at Fri Jan 28 12:04:31 1994.
    
    I'm about ready to SELL! ;-)

re    <<< Note 2871.28 by FRETZ::HEISER "my kid beat up your honor student" >>>
>                        -< rumor must have leaked out >-

>    anyone check the stock program recently?
    
>    DEC 199 1/2, change +160; DJIA 3940.00, change +0.00 at 12:00.
>    Report entered at Fri Jan 28 12:04:31 1994.
    
>    I'm about ready to SELL! ;-)


	Thats what the nyo server thinggie sez via xmosaic - but methinks
its a friday prank (-:

	Reg

    Re .28 and .29:
    
    Stock prices are entered every day on LIVE WIRE here in Corporate.
    If your local LIVE WIRE is showing something bizarre  PLEASE check 
    with your local systems people and
    bring it to their attention.  There could be a local server problem,
    which we can't fix from here.
    
    For the record, Friday's opening price was 30 7/8. 
    
    Thanx,
    
    Kate Nelson
    Editor, LIVE WIRE
    Corporate Employee Communication
                                                       

    I want to revisit this.  Just in chatting to people around my office I
    find surprising support for an employee buyout.  I personally like the
    idea - I think the incentive of owning the company would help us pull
    together and turn around.  I also think there are some opportunities
    for affecting management, but that's another story.
    
    With stock prices what they are, it's just too tempting to think about.
    
    Trouble is, we have no existing organization, such as a union, to start
    with.    What do you think, would people go for it?  Is it worth doing
    the grassroots work that would be necessary to make this happen?  Would
    the effort of making it happen, which could take a year or more,
    disrupt the company more than improve it?
    
    
    Even if stock prices double, I think we're a bargain.
    
    Thoughts?
    
    Ken b.

 Now is the time to do it.  What about Credit Union members?  That does
 give a nucleus for an organization.  When those who are charged with doing
 the work also share in the profits as owners, things do improve.  I believe
 it can only be for the best.

 I think it is a GREAT idea.

    I don't purchase DEC stock now and I wouldn't purchase it for an
    employee buyout.  Dan Dorfmann had an article in USA Today awhile back
    on employee purchasing company stock.  He indicated that if you were
    outside the company - would you purchase that stock?  If the answer is 
    No, then as an employee you shouldn't be doing the same.  That is one 
    mans opinion.  I can't remember who the other financial advisor that
    has a TV program but he once indicated that employee purchase of
    stock is a vote of confidence to Management.  My opinion is that I don't 
    have much confidence in the present management.
    
    I remember working in the Mill (approx. 86-89) and some upper-level
    managers had a meeting in a demo center I happened to be in.  The
    discussion was regarding the Company's employee evalulation. 
    Basically, there were TOO MANY 2's (1's being best) given out.  The
    Employee evaluations needed to average a 3 since the Company was
    averaging poorly.  I remember a question - If the Management is making
    poor business decision that affected company performance how does it
    relate to employee evaluations.  The answer was that from  an outsider
    perspective if the employees evaluation was averaging 2 then its NOT
    these individuals that are affecting the company performance.  Somehow
    employee evaluations needed to be inline with the companys performance
    from a business perspective.  This looked like passing the buck down
    the line...

    It would seem that even back then management had the silly perception
    that your increases were somehow tied to your job review.
    
    
    Brian V
    

I had a chance to ask a TWA flight attendant how they did the buyout.
She wasn't eager to discuss it in detail (not sure why, maybe it was
just that they were in the middle of meal service), but she did say
that all employees (including senior mgmt) took a *large* pay cut, and
that the money "saved" was used to buy back the stock. She offered no
more details. I can only surmise that they also borrowed some money.
And I don't know whether it was a total buy-back.

One thing which she was clear about: there was plenty of ambivalence
about it, and many employees weren't (and maybe still aren't) sure that
trading salary for stock was what they really wanted to do. But they
had pretty much concluded it was that or the end of the airline, and
possibly, their jobs.

As I said previously, TWA is a totally different airline, and is
currently, in my opinion, the #1 transatlantic carrier for comfort,
service (both inflight and on the ground), and punctuality. The flight
attendants and ground personnel all gave me the clear impression that
they intend to save their jobs by making their airline the very best. I
can't see how this kind of motivation could hurt DEC.

One thing that most of these employee buyouts have is
a ready supply of cash to start with. The two scenarios
most often played out are senior managers making large
investments in a partnership type arrangement or a
union or group of unions accessing dues and pension 
money to buy sufficient stock. 

I'm not sure that we have a situation that can provide
Digital employees with sufficient up front funding to
efect the change.

If I'm not mistaken, our pension fund is in excellent shape. Not that I
know that we could tap it for leverage, but if it can be tapped, it's there.

    The employees certainly should become more motivated if they owned the
    company, but two major things concern me:
    
    1. I am not sure there is/are the time and resources to do it.
    
    2. The company mostly needs effective leadership, how would employee
    ownership fix that issue?
    
    Jeff

>    1. I am not sure there is/are the time and resources to do it.

As we don't appear to have been bought by anyone just yet, there is
still time. Resources, I've no idea. But the opportunity may never be better. 

>    2. The company mostly needs effective leadership, how would employee
>    ownership fix that issue?

I don't know, nor is that the reason for my interest in owning the
company I work for. It's not obvious that a change in leadership would
solve DEC's problems. My reasons for employee ownership are:

- potential for personal financial gain
- avoid hostile takeover without having to resort to "poison pill"
- dramatic improvement in employee motivation

    I would believe that management in an employee ownerd company in more
    "employee oriented".  I think employees would have a say in who is the
    CEO.  

    From the newswire:
    
    ADVANCED MICRO LOSES HOLDERS' VOTE ON ITS POISON PILL
    
    Advanced Micro Devices Inc. unexpectedly lost a shareholder vote over
    the company's poison-pill takeover defense, raising questions about
    potential shareholder discontent with the semiconductor maker. The
    shareholder resolution, which was opposed by management, passed at
    AMD's annual meeting Wednesday. Though not binding on the company, the
    measure asks AMD's board to repeal its 1990 poison-pill plan or put it
    to a shareholder vote at a special meeting.
    

I read an article where some Wall Street types were saying the poison pill is
vastly overrated as a defense against a takeover.  The assumption that most
of the shareholders will want to go along with the BOD was cited as potentially
the biggest fallacy.  If any company with decent management and marketing savvy
wanted to buy us out, i'm not sure i'd vote with the BOD to block it at this
point.
								- paul

There seems to be an implicit assumption that a take-over by someone else is
something that The BOD has a moral obligation to try to stop.

This isn't really true.  The BOD has an obligation to act in the best interests 
of the share holders.  It has happened with other companies, Prime being a good
example, where the BOD flat out stated that its goal was to sell the company at
the best possible price.

We may not be quite at that point but given the current stock price, I'd say the
board should at least keep it open as one option.

What about the other stakeholders (such as the employees)?  That's open for
discussion but I think I'd be willing to listen to both sides.

Larry

From: [email protected] (Generic Account 0066)
Newsgroups: comp.infosystems.www
Subject: ANNOUNCE: EMPLOYEE OWNERSHIP HOMEPAGE
Date: 29 Jun 1994 21:55:37 GMT
Organization: San Diego State University Computing Services

*********************************************
* Foundation For Enterprise Development     *
*      Employee Ownership Home Page         *
*********************************************
url:        http://www.fed.org/fed/
contact :   Paige Ryan
           [email protected]
           (619) 459-4662

The Foundation for Enterprise Development is a non-profit organization 
dedicated to fostering the development of highly productive, competitive 
enterprises worldwide based on the premise that sharing company 
ownership and meaningful involvement with employees is a fair and 
effective means of motivating the workforce and achieving many business 
objectives.  Our activities focus on providing practical information and 
assistance to help companies implement equity-based compensation and 
strategies for involving employees in improving business operations. 

                          ** Advisory Services **
One of our most important activities is the assistance we provide to 
business owners and managers as they develop and implement employee 
ownership strategies for their companies.  In the U.S., we provide 
information and technical assistance to more than 100 companies annually, 
helping them evaluate the various methods of equity compensation, 
develop a plan to meet their objectives, and identify knowledgeable 
professionals for implementing their plan.

                     ** Conferences and Workshops **
The Foundation brings together business, academic and government 
leaders to explore emerging trends affecting enterprise development.  Our 
annual conference focuses on evolving legal, financial and human resource 
issues affecting the development and operation of employee ownership 
plans.  In addition, we host numerous other forums for exploring effective 
business strategies.
                            ** Publications **
Our bimonthly F.E.D. Newsletter contains valuable ideas on enterprise 
development, updates on employee ownership issues and reports on our 
activities.  Conference Proceedings provide insight into the legal 
developments and business trends affecting employee ownership, as well 
as case studies of companies which describe the methods and practical 
applications of equity incentives, including how they can be used to 
motivate employees and promote corporate growth.



--
*****************************************************************************
Eric Rickerson                          Foundation for Enterprise Development
[email protected]            Employee Ownership Home Page
[email protected],com                      http://www.fed.org/fed/
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What is Employee Ownership and Equity Compensation?

A key challenge of any company owner/executive is to motivate his or
her employees to work effectively toward the goals of growth and
profitability. The ideal scenario is that every employee is cost
conscious, understands the importance of customer satisfaction, looks
for marketing and sales opportunities, and creates ways of doing his
or her job more efficiently. In other words, every employee "thinks
and acts like an owner."

Some 12,000 U.S. companies now use equity-based compensation plans,
which include more than 11 million participants. Through the equity
compensation methods described in this book, employees own $120
billion in company stock. These plans are found in companies of all
sizes and in virtually every industry. Many of the country's most
successful companies have substantial levels of employee stock
ownership. Employees typically own minority stakes (from 10% to 40% in
closely held firms) although some firms are completely employee
owned. In addition, researchers found--by reviewing the SEC filings of
all 7,000 companies traded on U.S. public markets--that employees own
at least 4% of the company in 1,000 of these public companies. The
average employee holdings in these firms is 10%. These numbers are
relevant because they point to a growing trend in public and private
companies to involve some or all employees in the ownership of the
company in order to achieve business objectives. If done correctly,
equity compensation can result in a win-win-win situation: The company
can be more productive and competitive; owners can achieve liquidity
and/or gain partners in making the company successful; and employees
can gain an ownership stake in their company, with the opportunity to
use their talents and energies toward enriching themselves and their
co-workers.

Why do companies use equity incentive methods? Equity compensation can
motivate employees to work harder and smarter. An ownership stake also
helps align employee interests with those of the company. Equity also
can be a powerful tool for recruiting and retaining key staff
members. In the early stages of a company, equity can be used in lieu
of cash compensation to preserve cash flow during those critical
stages. One form of equity compensation, the Employee Stock Ownership
Plan (ESOP), is frequently used to provide liquidity for owners on a
tax-advantaged basis. Larger corporations sometimes use the ESOP to
divest a division and sell it to the division's employees. If tied
tightly to achieving specific objectives, equity can be a powerful
incentive to get employees to focus on a particular project, marketing
initiative, or profit goal. Some larger companies are now requiring
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help ensure that their personal financial incentives are linked to
long-term corporate performance. Many other corporations use equity
incentives to help achieve a variety of corporate goals.

A critical factor to the success of any equity compensation program,
which is too often overlooked, is employee communications and
participation. For equity incentives to be effective, employees must
understand how the plans work, what their ownership stake means, and
how they can participate in improving productivity and
competitiveness.  Sharing ownership with employees without providing
them meaningful involvement in making the company successful can be a
demotivator.

One of the most important services the Foundation for Enterprise
Development provides is free consultations to companies interested in
exploring equity compensation methods.  We meet with company owners
and executives, introduce them to the various methods, and help them
develop a plan to meet their objectives. Since we are not attorneys,
we do not implement plans for them, but we do serve as a good resource
for obtaining initial information and providing ongoing assistance as
the plan develops. As we have found, most equity incentive plans
require a continuing commitment from senior management to nurturing
the plan, communicating its benefits, and providing employees
meaningful involvement in the company. Our activities provide us with
an in-depth understanding of the practical applications of equity
compensation and emerging strategies companies are using to motivate
employees and achieve their business objectives.