Conference 7.286::digital

 Some background information about the Digital Equipment European Workscouncil


The Digital Equipment Euro-Workscouncil (EWC) is a european-wide coordination 
and information body of Digital Employees representatives. The members of the 
EWC are all Digital employees. Since in most european Digital subsidiaries 
there are elected employees represenation bodies (workscouncil and/or union 
structures), the EWC members are delegated by those bodies. In 1994 there are 
Digital subsidiaries from nine countries represented in the EWC - Austria, 
Belgium, France, Germany, Netherlands, Hungary, Italy, Spain, Sweden, UK. 

The Digital EWC was established in 1992 with the support of european unions and 
from the European Commission. As for any other multinational company, local 
workscouncil members and union delegates within Digital felt a strong need for 
transnational coordination and information exchange. The problem became still 
more urgent with the structural change in the IT industry and the deep crisis of 
the big computer makers like Digital. The high degree of centralisation of 
decision making within Digital undermines the power of the country management as 
partners of the local workscouncil and made the european coordination still more 
urgent. When in 1991 the EC publicised a draft directive for the establishment 
of european workscouncils within multinational companies, Digital employee' 
representatives from several european countries took the initiative to call for  
a first european-wide meeting. 

With the european legislation on european workscouncils being finalised in 
1995/1996, there are already many transnationals which have agreed on the 
establishment of european-wide representation structures (Renault, Volvo, VW, 
Nestle, etc.). Not so for Digital: in spite of the serious problems Digital is 
facing, Digital's european management has stubbornly refused to set up any 
dialog or any agreement on the establishment of a Digital EWC. For the time 
being the Digital EWC is neither recognized by the corporate or european 
management. Obviously the Digital policy not to recognize and to accept an 
existing international coordination within Digital Europe could not prevent the 
european-wide coordination of employee' representatives.

During the last 2 1/2 years the Digital EWC has focused its work mainly on three 
issues:

1.  Exchange of information on matters of general interest: restructuring and 
    downsizing of Digital, terms of "packages" respectively social plans, 
    comparison of working conditions within the european subsidiaries of 
    Digital, alternatives to prevent layoffs.

2.  Analysis and evaluation of Digital's strategies: since 1992 the Digital EWC 
    has concentrated on the discussion of the corporate strategies. In several 
    publicised statements the Digital EWC criticised the "single 
    bullet"-strategy (ALPHA), the partial withdraw from the service- and system 
    integration business with massive impacts on the job within Digital, and the 
    pure implementation of the corporate concepts.

3.  Coordinating infomation and solidarity strategies within the european 
    subsidiaries of Digital: the existence of the EWC and the european-wide 
    coordination of labour interests within Digital has already proven as a very 
    positive means of enforcing local actions. The strikes in Digital Italy and  
    France against layoffs and against the terms of the social plans as well as 
    the strike within Digital Germany covering the conditions of further 
    downsizing were obviously encouraged by the european-wide coordination. In 
    June 1994 the Digital EWC organised a european-wide demonstration at 
    Digital's european headquarters in Geneva. 
    

                     Questioning the DEC corporate strategy


The losses of DEC from FY91 to FY94 are real, even though the restructuring 
provisions and changes in accounting principles (above US$ 1.25 Billions in 
total for FY94 alone) make them look worse than they really are; quite 
definitely, some kind of action is required.

Which raises three questions, of direct interest to both shareholders and 
employees:

- is the current corporate strategy a winning strategy?
- are alternative strategic options available?
- does DEC have the means for the implementation of such options?


1. Is the current corporate strategy leading towards "a better Digital"?

The current corporate strategy is cost-minded and boils down to repositioning 
DEC on those products which can be handled with limited headcount, being 
marketable via external channels.

Accordingly, DEC is withdrawing - except for a very limited number of large 
accounts - from the headcount-consuming areas of business, i.e. "services":
	
- maintenance, which is being externalized (sold or franchised);
- consulting, which is being downsized, but for the "systems integration" 
  subsegment.

...and concentrating on "volume products", hoping that the ALPHA technology will 
eventually break through.

We believe that such a strategy is a loosing strategy, at least for two reasons:

- while gross margins rates on services have been stable from 38.3% in FY88 to 
  37% in FY94, gross margin rates on products have been dropping dramatically 
  and continuously from 59.7% in FY88 to 30.9% in FY94; services today 
  contribute for more than 50% to the overall DEC gross margin.

  The current headcount-minded strategy is therefore leading DEC to withdraw 
  from "high and stable margins" areas of business and focus on "low and 
  declining margins" areas of business.

- by focusing on volume products marketed by external channels, DEC is 
  challenging IBM, Compaq, Apple and HP on the playground where the Digital 
  competitive position is the weakest: low relative market share, late on the 
  learning curve, far from critical mass.

  More importantly, DEC lacks strong and formal alliances of the 
  IBM-Apple-Motorola type.

  We believe that a volume strategy initiated alone by a minor player on a 
  mature business and within a price war context is a highly dangerous gamble.


2. Are alternative strategic options available?

The alternative route is shown by all the comparable other players of the 
industry - IBM, HP, BULL - who are all currently investing heavily in services, 
including by taking over softwahre houses.

In the specific case of Digital, such an aggressive strategy would translate 
into:

- freezing any withdrawal from services, which incidentally would enable DEC to 
  keep and use the declining maintenance "cash cow";

- acquiring software houses to consolidate a strong competitive position in 
  services;

- building up alliances strong enough to face PENTIUM and POWER, possibly by 
  optimizing the DEC know-how in the area of telecoms.

Such a strategy would enable DEC to remain at a low strategic risk level by 
maintaining a diversified portfolio of businesses.


3. Does DEC have the means for such an alternative strategy?

Very oviously, yes, for the time being.

Despite the accumulated losses, DEC still retains the competitive advantage of 
having one of the strongest balance sheets in the industry; at the end of FY94:

- short term financial debts accounted for 0.3% of DEC's total liabilities and 
  equity, whereas this percentage was 14.9% for IBM and 13.1% for HP;

- the DEC net excess of working capital was US$ +1.15 Billions, whereas IBM and 
  HP acounted lacks of working capital: US$ -4.9 Billions and US$ 0.5 Billions 
  respectively;

- among IBM, HP and DEC, DEC was the only corporation with no net debt.

The situation is however urgent, as the balance sheet is degrading fast.

The bottom line question is: is DEC going to spend what still remains of the 
shareholders equity in funding restructuring expenses and financing a price war 
on low margin products?

Or is DEC going to invest, develop, and diversify, which IBM is demonstrating as 
the winning strategy?

We therefore demand that the DEC corporate strategy be re-evaluated, in order to 
save both the shareholder's equity and the employees' jobs.

A few ideas to remember:

Digital thrives in a free enterprise environment where we MUST control costs, 
we MUST quickly ramp up product lines ASAP.  THE LAW OF SUPPLY AND DEMAND 
applies in our business model.    We are driven by our market place.   

.2 The current headcount-minded strategy is therefore leading DEC to withdraw
.2 from "high and stable margins" areas of business and focus on "low and

	I disagree, this is a function of a market place trend.  It is the 
	market place which is driving this.   I beleive in general the 
	computer purchaser is purchasing machines which have a lower margin 
	of profit.   

.2 by focusing on volume products marketed by external channels, DEC is
.2 challenging IBM, Compaq, Apple and HP on the playground where the Digital
.2 competitive position is the weakest: low relative market share, late on the
.2 learning curve, far from critical mass.

	Again - I disagree, because Digital has recognized that there is a 
	large market share it can capture - AND THAT MARKETSHARE is 
	characterized by selling more at less we have entered what I believe 
	will be a big part of the NEW DIGITAL.  WHAT COMPANY HAS EXPERIENCED 
	THE LARGEST GROWTH IN PC SALES THE LAST 2 YEARS?    DIGITAL!  Could 
        this be because we noticed this marketplace? 

	What we should continue poping out VAX 10000's and sell them to the bit
	bucket for 0?   The market place has shifted!  THOSE OLD DAYS HAVE
        CHANGED - EVERYONE - WAKE UP AND SMELL THE COFFEE! 

.2  More importantly, DEC lacks strong and formal alliances of the
.2  IBM-Apple-Motorola type.

	SO LETS START CREATING NEW ALLIANCES!   DONT STOP BEFORE YOU START! 

	Cray, Kobota (SP), MICROSOFT, 
	
	ORACLE, QUANTUM
	
	COMPUSA, SAMS,    we need more...

	Lets not become defeatist... NEVER SAY DIE...

.2 - freezing any withdrawal from services, which incidentally would enable DEC to
.2   keep and use the declining maintenance "cash cow";

        That will really help!   What kind of revenue base will maintaining
        VAX 780s realize in the year 1998? 		
    
	If someone is in a business that is not generating/growing revenue - 
        shift them to a business that is or byby...  Why should the company 
        loose money at offering services that don't make money?  We should 
        NOT in my opinion.    Digital is NOT in  business to employee people. 
        It is in business to make a profit.  

.2 - short term financial debts accounted for 0.3% of DEC's total liabilities and
.2  equity, whereas this percentage was 14.9% for IBM and 13.1% for HP;
.2 - the DEC net excess of working capital was US$ +1.15 Billions, whereas IBM and
.2   HP acounted lacks of working capital: US$ -4.9 Billions and US$ 0.5 Billions
.2   respectively;
.2 - among IBM, HP and DEC, DEC was the only corporation with no net debt.
.2   The situation is however urgent, as the balance sheet is degrading fast.

For now in my opinion our balance sheet still looks pretty good.  Don't compare
IBM and HP numbers to Digital because they are not Digital.   Maybe you should
start looking at the ratios used to describe balance sheets instead.  Still 
business models vary...

Values in America and Europe seem to have there differences.   If I get layed 
off that's the way it goes...    I HAVE BEEN LAYED OFF TOO BY A EURPOEAN
    COMPANY!  in USA - strange - my European co-workers DID 
    NOT  get layed off and the company finally went belly up - what does 
    that teach you?

THAT A COMPANY IS NOT IN BUSINESS TO EMPLOY BUT TO MAKE PROFIT FIRST!

I wish your conference well.   But remember - we work because we make a profit 
for the company - Digital is not in the business AND SHOULD NOT BE IN THE
BUSINESS OF EMPLOYMENT FOR EMPLOYMENT SAKE.  

re: .3

I think a lot of what .1 and .2 is getting at is that there doesn't appear to
be (or hasn't been over the last couple of years) a strategy behind all the
cost-cutting other than cost-cutting for its own sake.  That may be changing--
at any rate i signed up for the December presentation of the strategy by
someone from CSD in the hopes of finally getting a picture of what (we think)
we are doing.  But all that free market rhetoric doesn't guarantee success to
anyone--we can succeed or fail in the free market based on how good our plan
is and how well we execute it.  Since the Workers Council folks have been
trying to get management to tell them what the plan is (apparently) and have
not gotten a satisfactory answer, it's not unreasonable for them to take
their questions to a stockholders meeting to see if anyone else shares their
perplexity (or has the answers).

- paul

in re .3:

| Digital thrives in a free enterprise environment where we MUST control costs, 
| we MUST quickly ramp up product lines ASAP.  THE LAW OF SUPPLY AND DEMAND 
| applies in our business model.    We are driven by our market place.   

Very true, but are we in control of our destiny? Are those same market forces
driving us to the ground?

| .2 The current headcount-minded strategy is therefore leading DEC to withdraw
| .2 from "high and stable margins" areas of business and focus on "low and
| 
| 	I disagree, this is a function of a market place trend.  It is the 
| 	market place which is driving this.   I beleive in general the 
| 	computer purchaser is purchasing machines which have a lower margin 
|	of profit.   

While the buying trend may be towards low margin systems, does this rule out
operating a more predictable and profitable service organization? After all,
other companies are able to leverage systems with consulting or make a complete
living on just consulting. Maybe that added value is what we need to make our
specialty goods more appealing. Perhaps the real problem is that Digital
management does not understand how to mold the existing organization into
something that could stay profitable ..

| Values in America and Europe seem to have there differences.   If I get layed 
| off that's the way it goes...    I HAVE BEEN LAYED OFF TOO BY A EURPOEAN
|     COMPANY!  in USA - strange - my European co-workers DID 
|     NOT  get layed off and the company finally went belly up - what does 
|     that teach you?

European's tend not to treat their workforce as a disposable commodity. But
much of that is enforced by legislation, not by inherently more friendly market
forces. If those managers had a chance, I'm sure they would have gotten rid of
their "expensive" Europeans first. 

Best of luck. Any constructive input can only help us with our recovery. Maybe
your work will spark some new and exciting ideas in the minds of our senior
managers.

>Per

    Who is the UK EWC representative?
    
    Cheers,
    
    Greg

    Commonsense overcomes cultural difference. ... Maybe.
    
    In all this, focus on *margin*, not revenues. If services margin is
    higher than tin, then it seems a good idea to do services, if we can.
    And I think we can.
    
    .. ah, but there's that 'revenue per employee' stuff to think about.
    
    Lesson to be learnt from Unisys and ICL here. (Big push into, er,...
    *services* !).
    
    At the risk of sounding quite a bore, please read (then re-read) all
    the management tomes that emphasise how Japanese companies look to the
    long term. Euros are part way between Japanese and free-market USA
    (depends in which Euro country you are in) in this regard.
    
    Flash that cultural warning light
    
    
    
    
    

    
    	Hey Wolfgang,  Are any of those members of the EWC, stockholders in
    DIGITAL?
    
    	If not, you would do well to remember that the AGM is a
    stockholders meeting and probably ONLY stockholders will be allowed
    entrance to the meeting.
    
    				Malcolm.

    stockholders or their proxies?
    
    ed

    
    	Both, now you come to mention it.
    
    				Malcolm.

Well, now I think I know a little better why we all got mail from the
VP of personnel suggesting that we stay away from the shareholders'
meeting.

    Hmmm... did everyone outside US get it, or did they limit that
    distribution to certain European countries?
    
    I was slightly amazed when I saw that the memo was distributed at least
    here in Germany; I guess the likelyhood of someone from Europe
    participating is so low anyway, that not engouraging them is rather
    useless.

    I think I got it through Reader's Choice.
    
    Charles

    Every one I know here in the UK received a direct ALL-IN-1 mail from
    Dick F. - stockholders or not.
    
    				Malcolm.

    	If that was the objective of the memo then it was not only
    unproductive, but ill-informed. Depending on the country, members of
    works councils may have a legal right to spend company time on
    activities like this.

    re .16
    
    I can see that a workers council may have a legal right to raise such
    matters with the corporate management but this does not imply that they
    have a legal right to represent their fellow employees at a stock
    holders meeting. The purpose of that meeting is for the corporation to
    report to its stock holders not to its employees, except where
    employees attend in the latter role.
    
    As a stock holder I suspect that my short term interests will not be
    helped by a group of European employees raising fundamental criticisms
    of management policy at a stock holders meeting.
    
    I would hope to see an opportunity being given to determine how
    representative these views are within the workforce as a whole and have
    them debated internally, as they have been in this notes file, rather
    than raising them in what is effectively a public meeting which will 
    hardly help restore confidence in Digital.
    
    As a UK employee I have not, so far as I am aware, been given the
    opportunity to elect a representative on this council and so don't see
    that it claim to represent the views of the UK employee population.
    
    Mike.
         

    I believe you dont have representation on a workers council in the UK
    because the Government will not ratify that section [among others]
    of the Maastricht agreement..
    
    
    JC

    re .18
    
    But .1 says the UK is represented.
    
    I believe the legal position is that we do not have the right in the UK
    to insist on a works council. However there is nothing to stopan
    employer cooperating to set up such a council. I believe most
    multinational corporations, even those headquartered in the UK, are
    intending to constitute works councils for their UK employees as well
    as those for the rest of the UK.
    
    Mike.

    3 weeks ago, the European community has agreed, that until
    the year 2000 all international companies working across Euope
    have to implement a "European Works Council". The only government wich
    didn't agreed was UK.
    
    I think, next time you should vote for a Labour representative?
    
    In Germany, we have a works councils since 1972. The last election
    at DEC startet this spring. About 85 % of the working staff participated
    on the elections.
    
    I think we should open a note about works council and what the are
    doing??
    
    regards
    
    `Volker
    
    

At the time of the joint EWC and MSF union meeting in Reading in July there 
was no UK represenatation, although the EWC was obviously in contact with MSF
members within Digital. I would also be interested in how the UK could be 
represented unless it was on a volunteer basis from the MSF membership.

Dave.

    re .20:
    
    �I think we should open a note about works council and what the are
    �doing??
    
    
    Plenty of notes about that here already...
    
    re .17: As far as I understand, the group discussed can only (and will)
    formally represent a group of emplyee stockholders and don't have to be
    elected by anyone.
    
    The EWC doesn't really have a  formal legal status (yet) anyway, and
    even if they did, that probably wouldn't count in US. But on the other
    hand, as stockholders, these people certainly have the right to pose
    any questions a stockholder possibly could in the meeting.
    
    It's sort of funny... there's a note full of whining about Dick
    Farrahar's memo, and now when a group of emplyees announces that they
    _will_ attend and possibly ask critical questions, there are people
    complaining about that.

    re: .17
>    I can see that a workers council may have a legal right to raise such
>    matters with the corporate management but this does not imply that they
>    have a legal right to represent their fellow employees at a stock
>    holders meeting. 
    
    	Since their fellow employees elected them, it is quite likely that
    they would be prepared to give their proxy voting rights to such
    representatives. I have not been asked to sign a proxy form for the
    several hundred shares I have, to give proxy to the person that I voted
    for, but if I were asked to I would.
    
    	I suspect that the only reason that the works council has not asked
    for such proxies is that they are all shareholders, and so don't
    require the proxies to attend the meeting, and they recognise that
    since employee shareholders have only a minority of the votes it is
    much more important to attend and influence corporate investors than to
    collect employee votes.

    
    	EWC article in Boston Herald. Not too flattering to Digital. Says
    Bob Palmer will not meet with delegation. Implies by tone that the EWC
    is here to cause trouble.
    
    ed

    RE: .25
    
    Local (Worcester, MA) radio station mentioned it during 5:30 A.M. news
    this morning. Kind of groggy, so I didn't catch all the details.
    
    My wife said she heard it on WBZ (Boston) radio during their local
    business section a little later.
    
    kjg

On WBUR they quoted a company spokesman as saying that management is willing
to listen to the group's suggestions.  Having read Farrahar's memo, I was
amused.

    
	The EWC delegation in Boston includes shareholders and/or
	proxies. All these people cannot therefore be denied access
	to the meeting.

	The EWC was elected in 1991 out of local work councils members:
	since then there have been continuous attempts to involve those
	Countries that either have work councils but are unable to actively
	participate to the EWC activities (eg. Spain, Finland), those where 
	work councils are very recent (eg. Hungary), those where there are
	no work Councils (eg. UK, Switzerland).
	There are various people who are in contact with the EWC without 
	being members or though not belonging to any work council.

	The delegation was formed out of as many EWC members who managed
	to raise funds to sustain the travel costs.
	There are representatives at least from: AUSTRIA, BELGIUM, FRANCE, 
	GERMANY, HOLLAND, ITALY.
	

		Livia

	...IF THE MOUNTAIN WON'T COME TO MOHAMED THEN 
	   MOHAMED MUST GO TO THE MOUNTAIN.....
    
    
    For the first time in Digital Equipment history, employees from Europe 
    are sending a delegation of employee representatives to the Annual 
    Shareholders meeting taking place in Boston on 10 Nov 1994.
    The delegation was chosen among the members of the European Works 
    Council (EWC). 

    As representatives and shareholders they are to express a series of
    questions to the board and their concerns around the current strategy 
    of the company and its impact on business, customer satisfaction and on 
    employment particularly in Europe.
    
    Digital in Europe is indeed a major contributer to the companies
    business and after significant downsizing in all European countries
    ( 35.000 in 92 to 25.000 today ) still continues to provide 54% of the 
    world-wide revenue. Company management is actively stepping up this 
    downsizing strategy to reduce its headcount even further ( estimated 6 to 
    10.000 more job losses in Europe ) and is employing a panoply of measures 
    ( individual layoffs, "voluntary" severance, company spin-offs, outsourcing 
    etc.. ) according to legislation and labour relations in the various 
    countries to drive this policy through.

    The employee representatives have plenty of doubts on the business 
    reasoning behind this strategy, and particularly:

        - Danger to drop drammatically revenues and profits, because of bad 
          investments, too much money spent in restructuring, too little
          care for R&D and product/services portfolio development
        - Likely excess of self-esteem and confidence by top management in
          their ability to manage with authoritary and centralised attitude
          the change process; if they fail, we fear the only alternative will
          be selling out DEC, and this we fear
	- Use of considerable part of the companies relatively favourable 
	  financial resources ( balance sheet shows figures ) for 
	  the purpose of gettig rid of its skilled workforce rather than in
	  revenue generating activities
        - Risk of loosing market share partly voluntarily (pushing out SME
          to VAR's and resellers) and partly involuntarily (banking so much 
          on large accounts while their trust and confidence in DEC is 
          rapidly decreasing)
        - Attempt to force onto the non US subsidiaries, particularly European
          ones, the same strategies and criteria used in USA, which are NOT
          necessarily the best ones for the local market
        - Conscient inducement of the European branches to financial troubles,
          risking bankrupcy in many sites, for no apparent reason but to 
          force the local management to accellerate lay-offs 

    These and more doubts are confirmed by an external consulting report,
    which summary is attached below in this flyer.

    On top of these, the representatives highlight the crippling effect 
    that such policies are having in Europe where more and more highly skilled 
    labour joins the ever-growing unemployment queues.

    Furthermore, following years of continual internal re-organisation and 
    workforce reductions, employee motivation is at its lowest ever and lack of
    confidence from customers is a growing risk.

    The European Work Council is a body of official representatives elected 
    within a given company from the different countries forming the European 
    Union, and whose constitution follows the rules of two European directives,
    the second finally adopted on 22/09/94. 
    Their aim is to improve cross-border relations between workers and manage-
    ment in multinational companies and many large companies have already 
    recognised officially these bodies ( e.g. Volvo, Nestle, Bull)

    Within Digital, the company continues to decline any consultation with
    this body, arguing that it is superfluous, given current consultation
    practices within each country. This is in direct conflict with the
    motivations behind the European legislation and Digital's refusal has been
    raised recently in a meeting in Strassbourg, with European parliament 
    members and ther Social Affair Commission.

    Various protest actions were organised by European employees and concerted
    by the EWC in the past couple of years, among others a demonstration in 
    Geneva in front of EHQ, with the participation of hundreds of employees 
    from the major European Countries; there again Management betrayed their
    promises and managed to avoid receiving the EWC delegation.

    The representives hope by their action in Boston to encourage an open, 
    constructive dialogue with management, at an appropriate level so that the 
    specifics and labour relation culture may eventually be respected within 
    Europe.
    

    
 Some background information about the Digital Equipment European Workscouncil


The Digital Equipment Euro-Workscouncil (EWC) is a european-wide coordination 
and information body of Digital Employees representatives. The members of the 
EWC are all Digital employees. Since in most european Digital subsidiaries 
there are elected employees represenation bodies (workscouncil and/or union 
structures), the EWC members are delegated by those bodies. In 1994 there are 
Digital subsidiaries from nine countries represented in the EWC - Austria, 
Belgium, France, Germany, Netherlands, Hungary, Italy, Spain, Sweden, UK. 

The Digital EWC was established in 1992 with the support of european unions and 
from the European Commission. As for any other multinational company, local 
workscouncil members and union delegates within Digital felt a strong need for 
transnational coordination and information exchange. The problem became still 
more urgent with the structural change in the IT industry and the deep crisis of 
the big computer makers like Digital. The high degree of centralisation of 
decision making within Digital undermines the power of the country management as 
partners of the local workscouncil and made the european coordination still more 
urgent. When in 1991 the EC publicised a draft directive for the establishment 
of european workscouncils within multinational companies, Digital employee' 
representatives from several european countries took the initiative to call for  
a first european-wide meeting. 

With the european legislation on european workscouncils being finalised in 
1995/1996, there are already many transnationals which have agreed on the 
establishment of european-wide representation structures (Renault, Volvo, VW, 
Nestle, etc.). Not so for Digital: in spite of the serious problems Digital is 
facing, Digital's european management has stubbornly refused to set up any 
dialog or any agreement on the establishment of a Digital EWC. For the time 
being the Digital EWC is neither recognized by the corporate or european 
management. Obviously the Digital policy not to recognize and to accept an 
existing international coordination within Digital Europe could not prevent the 
european-wide coordination of employee' representatives.

During the last 2 1/2 years the Digital EWC has focused its work mainly on three 
issues:

1.  Exchange of information on matters of general interest: restructuring and 
    downsizing of Digital, terms of "packages" respectively social plans, 
    comparison of working conditions within the european subsidiaries of 
    Digital, alternatives to prevent layoffs.

2.  Analysis and evaluation of Digital's strategies: since 1992 the Digital EWC 
    has concentrated on the discussion of the corporate strategies. In several 
    publicised statements the Digital EWC criticised the "single 
    bullet"-strategy (ALPHA), the partial withdraw from the service- and system 
    integration business with massive impacts on the job within Digital, and the 
    pure implementation of the corporate concepts.

3.  Coordinating infomation and solidarity strategies within the european 
    subsidiaries of Digital: the existence of the EWC and the european-wide 
    coordination of labour interests within Digital has already proven as a very 
    positive means of enforcing local actions. The strikes in Digital Italy and  
    France against layoffs and against the terms of the social plans as well as 
    the strike within Digital Germany covering the conditions of further 
    downsizing were obviously encouraged by the european-wide coordination. In 
    June 1994 the Digital EWC organised a european-wide demonstration at 
    Digital's european headquarters in Geneva. 

    
    Hope the previous few notes can help throwing some light on what's the
    EWC and why a delegation was in Boston these days. 
    
    I'll just mention the fact a for the occasion a meeting was formally
    requested by the EWC to Palmer/Pesatori/Damiani and that Damiani for
    all replied specifying he couldn't see the need for it.
    No matter local work councils subsequently replying to sustain the role
    and actions of the EWC, Damiani and the others have not changed their
    rigid attitude.
    
    Now, I wander, did any of the readers/writers of this notes conference
    attend the meetings organised by the EWC in Boston and Nashua to get
    together with the US colleagues? 
    I'd like to hear opinions and impressions. thanks.
    
    
    	Livia

Livia,
	thanks for the comprehensive explanation of the EWC and the EWC 
delegation's role. Could you also explain how the EWC representation is 
decided in the countries, and in particluar, the UK?

Thanks,
Dave.

    Bob Palmer's speech is now on LIVEWIRE. I wonder whether we will see a
    transcript of the Q&A session there too?
    
    Or did someone reading this attend?

    NPR ran a report this morning on the stockholder meeting and the EWC. 
    They played some of the interviews with EWC members as well as some
    from Bob Palmer's speech.  The NPR spin was that there was some 
    agreement between Bob Palmer and the EWC, though I expect that was 
    more spin than substance.
    
    The gist that I got from it was that both sides expect more layoffs in
    Europe.  According to the article, there is difference of opinion as
    far as where the company should go.  That is, the company is heading
    towards a low-margin market in Alpha and PCs.  The EWC member
    interviewed regarded this as the wrong direction.  The idea being that
    as long as Digital targets this market it will continue to face
    layoffs.  Also, a point was made that as long as Digital continues to
    layoff European workers it will affect Digital's ability to market in
    Europe.
    
    Steve

    re: .34
>Also, a point was made that as long as Digital continues to
>layoff European workers it will affect Digital's ability to market in
>Europe.
    
	This is probably true. The nationalism amongst the average member
    of the public (voter) is the main reason why European integration is
    going so slowly. If a company or group of companies doesn't have a
    significant investment in your country then a lot of people go to a lot
    of trouble to ensure that their products are not bought there. But it
    is only 54% of DECs market.
    
    	If I were Bob Palmer (and assuming he takes any sort of long term
    view) I would be worried that the EU could develop a pan-European
    nationalism, with  high tech industries and a market double the size of
    the U.S., and a lack of interest in anything not produced within the EU
    (or at least with some significant contribution).
    
    	The EU currently has something like 50% more population than the
    U.S., and with new countries joining that will increase. 

    re. .32
    
    Since the beginning of its activity, the EWC took care of defining the
    rules of its organisation and running.
    I attach hereafter an excerpt from the EWC Constitution.
    
    In relation to the EWC members election, the constitution states who is
    eligible and how many people per Country; it is up to each Country then
    to organise for local elections depending on the local situation and
    regulations.
    
    As per UK, we've never had an official UK Digital delegate, for the
    reasons mentioned in previous notes; as I said we have contacts anyway,
    and pretty often a T.U. officer has attended our meetings (with no
    right to vote).
    
    	Livia
    
    
    EXCERPTS FROM:
    " Constitution of the Digital Equipment European Works Council "
    
 
    [...]   
     
    1 Name, Area of Operation, Location
    
    1.   The name of the committee is "Digital Equipment
    European Works Council".
    
    2.   The area of representation is open to all the European 
    undertakings where Digital Equipment Corp. or one of its 
    controlled companies is the control undertaking. Membership 
    is voluntary.  Joining indicates acceptance of the framework 
    and of this constitution.
    
    3.   The location of the Digital Equipment European Works
    Council is Brussels.
    
    
    2 Composition
    
    1. The Digital Equipment European Works Council consists only
    of employees' representatives.  Members cannot be appointed
    by management.
    
    2. The employees' representation bodies of the subsidiaries 
    in the individual countries are responsible for appointing
    their representatives and their deputies in the European
    Works Council.  If there are more subsidiaries with
    employees' representation bodies within an individual
    country than mandates available for that country then the
    representation on the European level should be based on
    consensus.
    
    3. The term of office is tied to the mandate duration in the 
    local representation bodies. The maximum duration is four 
    years. The mandate can be renewed.
    
    4. The allocation of seats in the European Works Council is
    determined by the need that each individual country with a
    Digital subsidiary must be represented and secondly by the
    size of the local Digital workforce.  The number of
    representatives of an individual country in the European 
    Works Council is related to the number of employees at the 
    time of the elections of the local representation bodies.
    
    5. Therefore the minimum allocation is one seat, with one 
    seat per every 1000 employees. the maximum allocation per 
    country is three seats.
    
    
    3 Meetings
    
    1. The European Works Council meets at least once a year. 
    Extraordinary meetings if need be may be convened at the 
    request of 10% of the DEWC members or the members from one 
    country.
    
    2. The DEWC may set up sub-committees if need be.
    
    3. Decisions of the European Works Council are made on the
    basis of the majority of the votes of the members present.
    In the event of a tied vote, a motion s be considered to be
    rejected.  The quorum will only be reached providing half of
    the committee members are present.  Members may be replaced
    by their deputies.  
    
    4.   Each member of the European Works Council has one vote.
    
    5.   Each member may be accompanied by an outside expert.
    

	[...]    
    
    7 Cooperation with unions
    
    1.   The Digital Equipment European Works Council shall work
    with the trade unions unions in Digital companies and 
    operations.
    
    2.   External union representatives can be invited to the
    meetings by agreement of the Board.
    
    

re.36:

Thanks!

Dave.

    Could a representative of the Council state what the alternative
    strategy for Digital is? I gather it is low volume, high-margin,
    people intensive, but would like to hear more. What is behind this
    question is that the Digital Management has access to a lot of
    expertise and probably paid some money to get different views of what
    the best long term strategy is and they are now committed to this
    strategy.
    
    Now, here is my problem in giving my vote to the Council: Your basic
    objectives appear to be different from the basic objectives of the
    Digital Management (i.e profit first vs employment first). What are
    the chances that you get the management to listen (let alone: act) on
    your ideas? 
    
    As a Digital Manager I would give you the answer Damiani gave: What use
    is it to listen to you?  
    
    So it appears that you are reduced to making life difficult for the
    Digital Management and make sure that they play by whatever rules
    that apply. 
    
    Would it not make more sense to think *with* the management and make
    sure that they are succesful? This just might lead to more employment
    in Digital or less need to focus on getting rid of people now.  
    
    Al
    
    PS:
    
    I noted that Bull was mentionned as one of the Companies that 
    agreed to a European Council. Can you let us know why this is a good
    example and I mean in terms of your objective: Employment. 
       

  There is still no transcript of the Q & A section of the annual meeting on
Livewire. Can someone tell us if the EWC representatives asked any questions
and if so, what?

Re .38 Al,

As one of the members of the delegation, maybe I can give you a little more
information.  Although some of what I will be saying is my personal opinion
and not necessarily the opinion of the EWC.

The basic gist is that I don't believe Digital should ignore the high-volume
low-margin market.  The main suggestion is to keep the low-volume high-margin
businesses intact until the h-v l-m market takes off.  The high risk situation
that Digital is entering into is due to the fact that we are (seemingly) con-
centrating on h-v l-m and laying off the people that have been doing the l-v
h-m stuff.  That means that our "cash cows" (l-v h-m) are being killed off
before the other business begins to bring in the needed funds to keep Digital
from dying a horrible death.

Add to that the fact that some of our installed base feel that Digital has
left them in a lurch.  They no longer have direct contact with Digital, and
they need continued support, as well as migration to Alpha.  The loss of the
support people is making it increasingly difficult, if not impossible, to
help those customers.  Once they get good and mad at Digital (already happened/
happening) they begin to look for another supplier.  Facit, if they have to
move to a new hardware anyway, then they will move to a supplier that will
support them in the future, rather then leave them hanging.

My suggestion would be to better support/migrate the installed base, and main-
tain the l-v h-m businesses.  Yes, that is labor intensive, and would mean 
that we will have to keep more people on board, and that will cost money.  But,
the higher margins in those areas would justify keeping the people.  Provided,
of course, that we can get the cost structure in line (a better ratio of man-
agement to individual contributor would be a good start, plus better management
of assets).  These activities should help finance our "attack" on the h-v l-m
market.

The problem with the h-v l-m market is that we are trying to enter a market
that is extremely "cut throat" in nature.  Plus, we are going after a market
that has established leaders.  If it were a new, niche, market where our 
chances of success would be higher, then I would look at it differently.  As
it is, we are entering a market where we've had our problems in the past (PC),
where the cost of entry will be relatively high, where our marketing skills
(typically a weak spot of ours) will be taxed to the max, and where we need to
rely on partners who don't have to sell Digital products.  All these risk
factors and we are killing off the businesses (installed base and services &
consulting) that have been bringing in good money.

My hope would be that we could at least enter into dialogue with management.
It is at best counter-productive to work against management, but I have to
be clear about the fact that I disagree with the way management is treating
the employees.  It's not that I believe we've got nothing better to do than 
throw money away, but I believe that more harm is done when people are treated
as if they were consumible goods.  The attitude that I see prevalent in Bob
Palmer's speech at the shareholder's meeting, and in his answers to my ques-
tions, are disturbing.  Basically, the only real accomplishment over the last
two years (presented by Bob as something positive) was the lay-off of 30,000
employees.  Sounded like a general telling congress that it was sad that the
war had not been won, but at least he was able to reduce the defense budget
for soldier's wages significantly.

From my short discussion with Bob at the meeting, and from discussions with
German management some time ago, it's evident that management sees the employ-
ees not as their most valuable asset, but as their most costly liability.  As
well as treating them like expendable items.  ie, use the employee until you
feel like doing something else, then throw him/her away and hire new ones to
do what you feel like doing now.  I told Bob that he would get more loyalty
from the employees if he would retrain the current employees, rather than 
laying off the old ones in order to hire new ones.

All this leading up to another suggestion of mine, ie, as the h-v l-m market
takes off, and assuming that the l-v h-m market really isn't paying off, we
could move the affected people into other market opportunities.  Basically,
I believe Digital should diversify, rather than narrow its focus.

So, in a nutshell:  go after the h-v l-m market, streamline the cost structure
in the l-v h-m bussinesses in order to help finance the attack on the h-v l-m
business, then continue to expand into new business opportunities in the 
future by moving excess resources from the portions of the l-v h-m businesses
that are dying off into those new businesses.  Goal: we quit concentrating on
cutting costs and start concentrating on making more profit, we improve em-
ployee morale by offering them security and long-term opportunities/challenges,
and Digital climbs out of its rut and begins to be a great company, and a 
great place to work, again.

Rob

Re .39 Bob,

I don't want to speak for the others, but yes, we did get a chance to ask 
some questions.  Derek Lee, chairman of the EWC, brought up the issue of the
employee problems in europe ("Europe is a mess"), Ernst Kumschliess (works
council member from Germany) and myself brought up some issues surrounding
the "german solution".  I also raised some issues around UNIX support.  And
Grace Taiana (works council member from France) brought up the problems with
the debts (technical bankruptcy) of the subsidiaries in some european coun-
tries.

For those that don't know, the "german solution" is: Digital will be finan-
cing the start of a new company that will take the employees that were 
supposed to be laid off by Digital.  The company will be a totally independant
company that will try to make a go of it in the market and create/maintain
as many jobs as possible in those businesses that Digital no longer wants to
do itself.  Bob said that they were looking at using similar models elsewhere.

My main question revolved around Bob's statement that Digital has leadership
technology in UNIX, and the fact that we don't have enough people in the
field to support UNIX.  Bob's answer was: we need to hire UNIX people.  To
which I answered: we need to retrain the people we have (basically).

I doubt that there will be a transcript of the Q&A session.  As far as I could
tell, noone was recording it, but I may be wrong on that.

Rob

    re .40: I think you are talking a sound strategy and one that no one
    has a problem with. I also think that we needed every lost dollar (make
    that: Penny) from the cash cows and every last profit penny, to do what
    we needed to do and survive. 
    
    You see that as abandoning a good and profitable strategy. I think it
    should be seen as taking a chance.
    
    Al
      

    RE: previous few
    
    I don't  believe  that  the  company is trying to move away from high
    margin products, the  problem  is  that customers are not buying them
    any more.  So we cannot turn our heads  away from market realities as
    painful as this may be.  We are paying now from the mistakes  made in
    the past, and I prefer to look to how do I get out of  this hole than
    to point  fingers on who put me here (besides myself).  I don't think
    it will do me any good.
    
    I expect the ABU and many of our partners (remember they also need to
    make  money!) to continue to push the high  margin  sales,  while  we
    scramble to increase  our  low  margin sales to enough volume to make
    them profitable.
    
    OLD's 2�
    

    
    	-1 Au contrieur!
    
    	Customers are buying high margin products like maniacs. Witness
    H-P, IBM, SUN, and Compaq. Do not confuse high margins with a high
    cost structure. Our cost structure is riduclous.
    
    	Digital's problem is that it has gotten itself between a rock and a
    hard place, and management refuses to think in any other terms except
    old tired 1980s solutions.
    
    	Can't agree more that the "we are now paying the mistakes" are
    those of us actually DOING the work. Unfortunately Digital is not a
    democracy; we do not get to vote on corporate directions, strategies,
    etc.; hate to say this but the choices belong to each and every
    individual - you can vote - for you. (Don't take this as being specific
    to -1).
    
    	The realities are customers want to do business with people. If
    the local people are gone, then who do you do business with?
    Computerland is us? If that is our model then we will look just like
    Compaq - $10B in sales; 12,000 employees. As for me if I wanted to work
    in THAT environment, I'd have done that a long time ago.
    
    	My suggestions are all in note 3480. But that requires people at
    the scene; not sitting in MA believing they are all knowing and
    omnipresent; the Europeans are correct, regardless of whether it is
    "politically correct" or not.
    
    	Keep it up folks, you have my vote.
    
    
    			the Greyhawk
    
    	

    
    --------------------------------------------------------------------------
    Euro Workscouncil participation in Shareholders meeting - Boston 10th Nov.
    --------------------------------------------------------------------------

    For the first time in the history of Digital, a delegation of the
    Digital European Workscouncil  consisting of elected representatives from
    France (5), Germany (4), Austria (1), Belgium (1), and  Italy (1) 
    visited the Annual Shareholders meeting held in Boston on 10th No 1994.

    The main purpose of our visit was to raise the issues of downsizing, 
    layoffs, its effects on employment and business, and to question 
    the company's business strategies in the presence of the major 
    shareholders. The delegations questions and arguments were supported by 
    financial and strategic analysis carried out by a firm of external 
    consultants mandated by the European Works Council ( available at
    all local works councils ). This action also followed the latest of a
    a series of refusals by company management to open up a constructive 
    dialogue with representatives at the European level.
    
    The delegation was received warmly by US unionists from SEIU (Services 
    employees) and CWA (Communication Workers) who helped greatly with
    the organisation in preparing press and other events and helping us with 
    the distribution of leaflets outside the Shareholders meeting. We were 
    able to draw on their large experience and advice both in organisational as 
    well as in legal matters to prepare this important action.
    
    The event generated large press and media interest due to its unprecedented
    nature, its multi-cultural aspect and due to the incomprehension by 
    Americans that employees COULD and WOULD dare to question the strategic 
    decisions of a major multinational US company in its annual shareholders 
    meeting. ( One question from an amazed and supportive shareholder : how 
    come you guys are not fired after asking such difficult questions...) ?
    In addition there was a general amazement that we were able to propose 
    alternatives to the direct downsizing approach of Digital.

	Press excerpts :

	Boston Herald - .."A delegation from Digital's European Work Council
			peppered Palmer with questions challenging the 
			company's overseas strategy.."

			.."You downsized the employee population by 40% in 
			three years...you have rampant demoralisation..
			customer dissatisfaction is on the rise..yet you
			continually refuse a dialogue with the elected
			representatives of the workers "

			.." a Unix support specialist in Germany, said he
			fought to no avail for equipment, support and training..
			leadership technology means nothing if I can't get out
			there to support the customer.."

	Middlesex News - .."Digital's strategy is misguided because it is
			 eliminating the service people who provide high-margin
			revenues, and relies on the sale of personal computers
			and low-end workstations, which have low profit
			margins "..

    Prior to the annual meeting, on Wednesday, November 9, the delegation met 
    several journalists and received large press coverage for the morning of the
    event. Preparation work continued that evening in a meeting with US 
    unionists to inform them of our work and agenda in Boston.

    On the morning of the meeting leaflets were distributed at the entrance
    describing our  social, financial and strategic business concerns with the 
    current company strategy. This information was read by shareholders going
    into the meeting and served as background information to our, and
    indeed their own questions. Simultaneously several press, radio and TV 
    interviews were held with various of the delegation members. Copies
    of these are being posted in the notice boards and will be posted as
    received.

    All the delegation then went on to participate in the Shareholders meeting.
    After the very short balloting period and a relatively short speech
    by  B. Palmer the floor was opened up for questions.

    The initial tone of questions from shareholders was very direct and
    sometimes aggressive. After introducing ourselves as minority shareholders, 
    employees AND employee representatives, which seemed to spark the interest 
    of the audience, we managed to raise several questions  relating 
    to :

	Why Digital is not working to maintain social peace in its 
	European subsidiaries ? 

	Why Digital is spending its cash mainly for downsizing and risky 
        Alpha- and PC business development rather than on other more
        lucrative business ? 

	How Digital is to conquer the UNIX market while at the same time 
        laying-off specialists and support people ( example of Germany given )?

	Digitals under-capitalisation of the European subsidiaries, increased
	royalties, write-offs of Kienzle...a strategy to kill business in
        Europe ?

    Furthermore some attendies and customers raised similar questions. 

    Obviously Palmer had problems in answering some questions but was able
    to assure the participants of his pride for the employees and his desire
    to get the pain of downsizing over with as quickly as possible. 

    He referred to his wish to explore and to discuss locally on valid
    alternatives to direct layoffs and quoted the current German "analog" 
    externalisation model as a solution which could be used for other European 
    subsidiaries. He emphasised the importance of Europe and denied any 
    attempt at under-capitalisation of it subsidiaries or any withdrawal 
    strategy.

    After about 55 minutes Palmer finished the meeting in spite of 
    a field of waving hands in the audience and many questions still
    without answers. Several DECies and Non-DECies welcomed afterwards our 
    interventions at the meeting.

    A transcript of the questions and answers will be made available as soon 
    as possible. A small video of the day including parts of the Q/A session 
    will also be sent shortly to local employee representatives for diffusion.
    
    Later in the afternoon a meeting with US colleagues was organised in Nashua 
    following invitations via e-mail and press. Two very brave US employees 
    showed up and followed, with great interest, the presentation and the 
    discussions that we had. US unionists had foreseen and warned us of the 
    great probability of a zero turnout to such an event due to the inherent 
    fear of being fired. Please refer to the Digital Notes conference located 
    on HUMANE:: ( note 3495 ) for more information and discussion on the
    European Works Council and the Boston event.

    In conclusion, the European Works Council is very satisfied with the 
    their action at the shareholders meeting. It has shown that an organised 
    representative body, the EWC does indeed exist, in spite of the refusal of 
    recognition by the company and that it is able to co-ordinate, analyse, 
    comment, and act in the interests of all employees and the company. This 
    has already brought tangible results in handling alternatives to layoffs 
    in a more acceptable and equitable way ( example of spin-offs in Germany 
    and France ). We have demanded and expect an open, democratic dialogue on 
    the subjects which concern both the employees and the shareholders of the 
    company. We are certainly not working against Digital and sincerely hope 
    that upper management will use our questions and concerns to make the 
    necessary adjustments to their plans and strategy in the interest of us 
    all. We will be following this action up by sending the complete list of 
    questions and our analysis to them.
    
    thanking you for your attention and support,

    regards 

    The European Works Council.
    

    The following reply has been contributed by a member of our community
    who wishes to remain anonymous.  If you wish to contact the author by
    mail, please send your message to ROWLET::AINSLEY, specifying the
    conference name and note number. Your message will be forwarded with
    your name attached  unless you request otherwise.

    Bob - Co-moderator DIGITAL

===============================================================================

    re 3495.45:

    I liked the whole idea of a group of employees exposing some of the
    "dirty laundry" that's been swept under the rug to the light of day! 
    As someone in here said earlier, when you've exhausted the avenues of
    addressing problems quietly and internally, perhaps its TIME to expose
    them to the light of public scrutiny...  It would also have been good
    to expose some of the financial shenanigans such as raises for the SLT
    when there's a freeze on, huge golden parachutes for people who's
    actions have been detrimental to the company, etc...

    It appears to me that this could be a way to help insure that when
    upper management plays their little back-alley, closed-door, power
    games - things that have often been detrimental to morale, employee
    perception of value, or other damaging activities and policies (as can
    be found in many places in this notesfile), there'll be SOME kind of
    public accountability!  Maybe if they KNOW they'll be confronted by a
    horde of angry stockholders, WHO JUST HAPPEN TO ALSO BE EMPLOYEES, at
    these meetings perhaps there will be a pause BEFORE such policies are
    implemented!

    It also seems obvious to me that there needs to be a major
    participation from U.S. employees in the future to emphasize the
    interests in the US, ESPECIALLY where they differ from those of Europe,
    just as the EWC did for Europe...  As someone said a few hundred years
    ago - "Either we all hang together, or we'll surely all hang
    separately."  

    Just look through this string to see a few examples of how the rift
    between employees and management has grown:

    	Palmer "refused" to meet with the EWC before the stockholders
    	meeting...

    	Palmer ended the Q&A session "while there was STILL a sea of waving
    	hands"...

     	<pick any of your favorites>

    Any day now I expect to start seeing him use the imperial "WE" when
    addressing his subjects...

|    them to the light of public scrutiny...  It would also have been good
|    to expose some of the financial shenanigans such as raises for the SLT
|    when there's a freeze on, huge golden parachutes for people who's
|    actions have been detrimental to the company, etc...

Salary actions and contract T&Cs for executives and officers of the Corporation
all take place under the very bright and penetrating light of the Security
and Exchange Commission, the SEC.  It is all *public* information, published
by the company to the SEC via various forms.  It's available from Investor
Services via a phone call, through nearly all brokerage houses, some public
libraries, and get this, even on the Internet.  This information, and a good
deal else, is all available for those who take the time to learn where to
find it and how to get it.

Marc

    
    Trends from the Digital FY94 10-K SEC filing:
    
    Revenue $M:  	FY94		FY93		FY92
    
    	U.S. 		7007		7013		7054
    	Europe		6205		7607		7272
    
    Inc/(loss): **Including Restructuring Allocated to U.S. and Europe**
    
    	U.S		(740)		(363)		(1971)
    	Europe		(1109)		12		(184)
    
    Restructuring Charges: **Total Allocated to U.S., Europe & Other**
    
    			1206		0		1500
    
    Digital is required to report revenue, operating income, and assets by
    geography, but is not required to report the allocation of expenses,
    such as restructuring charges, by geography.  To my eye, and this is a
    quess only, the numbers make more sense if more of the restructuring
    charge was assigned to the U.S in FY92, and if more of the
    restructuring charge was assigned to Europe in FY94.  
    
    The fact that European revenue dropped $1.4 billion from FY93 to FY94
    while U.S. sales were constant, appears to be the main reason why
    European expenses may need to be cut more drastically at this time.
    
    Carter
	
    

    re: .48
>    The fact that European revenue dropped $1.4 billion from FY93 to FY94
>    while U.S. sales were constant, appears to be the main reason why
>    European expenses may need to be cut more drastically at this time.
    
    	As the largest employer on the West coast of Ireland and a
    substantial employer on the East coast DEC used to be highly favoured
    in Irish government contracts. It was almost impossible to get French
    government contracts until DEC established manufacturing in France.
    Guess what has changed. In Germany DEC bought up a local German company
    (Kienzle) and is in the process of making all its former workers
    redundant.

    re.48
    Our management told us that one of the reasons why Holland is making
    less profit (mind you, still not posting a loss) is because whe are
    paying more for the products to corporate.
    Corporate being in such a bad shape is actually the only reason why
    the profitable Dutch subsidiary gets away with lay-offs.
    
    Charles

re .-1

I always find the claims of a specific Country/subsidary of Digital to profits
difficult to understand. They all sell Digital products and services. It is easy
to calculate the revenue a Digital subsidary generates but how about the
expenses/costs. How do they calculate that? Direct expenses such as office,
employee salaries, supplies etc. can be stated correctly but how about the
costs which go into developing the products? Are the product development costs
allocated to various Digital subsidaries?

Avinash

    Costs of development are usually included in the price a subsidiary
    pays for the products they buy from the corporation.
    If this is not the case within Digital, it's time we hire some people
    who are capable of doing some decent cost calculation rather than
    bean counters who are only capable of counting heads.
    
    Charles

    Re:   <<< Note 3495.44 by POBOX::CORSON "Higher, and a bit more to the right" >>>

    Let  me  try to be more specific on MY  opinion  on  high  margin/low
    margin products.
    
    I haven't seen/read (which doesn't say it may not exist) any official
    statement (other than here) stating that we will sell only low margin
    products  and  only  through channels.  What I see is  Digital  as  a
    company  trying  to increase it's presence in the low/mi-range end of
    the  market  with  products  that have more in common to the products
    that channels sell (Intel, NT, UNIX, printers, etc).  Also that slaes
    to other than the top (put you  number here) customers is better done
    indirectly (cheaper, more flexible).
    
    I definitely believe that there is a market for high margin products,
    but is shrinking or at least not growing.   Other  computer companies
    are showing great profits because their costs are more in  line  with
    market  realities, but that doesn't mean these profits come from high
    margin products  sold  directly.   Of the four companies mentioned in
    .44 only IBM  could be said they are still in the high margin product
    business (mainframes), and that  is due to the fact that they own the
    large majority of that market.  The  other  ones:  HP, Sun and Compaq
    sell  predominantly low margin products (workstations, PCs, printers)
    through channels.
    
    But if  someone  thinks  that channels will take care of itself, i.e.
    represent Digital in  the  same  way we would do it ourselves without
    really  putting  a  lot   of  effort  and  money  into  building  the
    relationships, I have a political  party  for  them to join.  Or as I
    heard a high level executive of a well know SI company say:
    
    "If you want loyalty, buy a dog"
    
    OLD

    Compaq prints money with it's ProLiants; something like 3% of revenue
    accounts for 20% of profits.  They're not completely low margin.
    
    They were at $2.83B in revenue this last quarter, growing at over 60%.
    Digital was at $3.14B in revenue, growing at 4%.  They should pass us
    at the end of the current quarter to become the 3rd largest computer
    company based in the U.S.
    kb

    re: .51
    	The price that DEC charges for a product to an external customer
    has to be fairly uniform world-wide. Otherwise you will get cases like
    that of Plessey (a U.K. company) who found it worth while long time ago
    to set up a subsidiary in California whose only purpose was to submit
    purchase orders to DEC in California claiming maximum discount and
    specifying delivery addresses in the U.K..
    
    	The price that DEC (corporate) charges a subsidiary, particularly
    for software products, can be a flexible way of deciding how much of
    the profit goes to corporate and how much remains in the subsidiary.
    There is no concept of a "fair" price for the subsidiary, and the
    subsidiary has no other source of supply.

     .55 is totally correct.
    
    In other words, DEC (the corporation) can easily influence the
    profit/loss of a subsidiary, without any chnages in the 'profitability'
    of that subsidiary. Most multinational companies obviously try to
    accumulate profits where the tax burden is low; if corporate taxes in a
    given country are high, they would make sure the 'profit' in that
    country is low (usually by charging that subsidiary more for the stuff).
    
    

    
    	.53
    
    	The problem with low margin products produced by Digital is that
    we lose money on every transaction regardless of distribution method.
    And you do not grow your way out of the problem with an SG&A geared
    to high margin product placement. You pick one or the other and then
    be the best in class worldwide. Period.
    
    	Everything else is self-delusion.
    
    			the Greyhawk

    re: .55 & .56
    
    So you are saying that the country uplift off the MPL is determined by
    the corporation - not the specific country's cost of doing business?
    
    From what I have been told, each country mangement team decides how
    much additional it will cost to do business, given local country
    tradations, etc.and adds that in as part of the country uplift.  And
    from what I have seen, the higher the uplift the better the facilities,
    perk's, etc.
    
    rww

    re all those about prices in subsidiaries...
    
    A European sub will 'buy' product at a trasfer cost.
    
    The cost is then adjusted by the local cost of sale and SG&A, the
    contribution to be made at country level and the contribution to be
    made at Area level.
    
    The adjusted transfer cost is then converted to local currency at a
    rate determined by negotiation between the subsidiary and corporate,
    possibly with the intervention of European Area.
    
    Finally the numbers are adjusted so that the corporate tax due in the
    subsidiary's host country is 'reasonable' - most countries do not like
    foreign owned subsidiaries to persistently have a zero local tax
    liability.
    
    In other words there is a lot of number juggling goes on between
    transfer cost and list price.

    re .several: (A question to those in the know):
    
    Does corporate charge every subsidiary exactly the same prices for
    everything (apart from maybe different shipping costs)?
    

    re .60
    
    >Does corporate charge every subsidiary exactly the same prices...
    
    Yes, but...
    
    ...as soon as you've modified the price charged by the exchange rate
    any equality is destroyed.

    re. a few previous replies:
    
    There is a number of factors to be considered when talking about Corp.
    juggling with subsidiaries P&L and future:
    
    1) one item is definitely the way subsidiary charges are accounted:
      prod. prices uplits in the conversion from MLP to CLP, SG&A expenses
      calculation, rate of exchange calculation, fixed percentage Territory
      Contribution Margin, internal resources charges, etc. are all fixed
      by the Corporation and Subsidiaries have very limited power in adapt-
      ing figures based on the local market reality. 
      I'm no finance specialist so I won't go deeper in the subject, but I
      can guarantee that the margins the business should have in the
      subsidiaries to match the requested Corp. PBT is way off the market
      average; it ends up that our margins would be extremely good, if 
      calculated on real numbers, but look lousy after having gone through
      the internal number-munching finance mechanisms.
    
    
    2) more worrying are items like those mentioned in .48 and .49 or 
      thereabout, i.e. operations that were forced onto the subsidiaries 
      and have induced losses. Some examples:
    
      . PHILIPS: that was to be an investment in the SME market; we spent
        a tremendous amount of money attempting to integrate their prods.
        with ours, confused our strategies and customers, lost their good
        good customer base
      . MANNESMAN-KIENZLE: as said, we bought them and now spend money to
        force them to lay-off
      . OLIVETTI: we over-paid the 10% shares we bought (there was even a
        stock exchange investigation to understand why we paid so much over
        their price) and now have sold them when they were at their lowest
        for no apparent reason (DEC has plenty of cash, did not need more)
      . SIPAC (a med. size 3rd party maintenance company in Italy): a
        successful company, till we got our hands on them; now they're
        considering closing down.
      . etc. etc.
    
    3) I could go on like this for ages, reporting dozens of bad investments
      that 'accidentally' end up weighting onto the subsidiary balance sheet, 
      for some reasons.
      In the EWC we oftern wandered: are they fools or what, when they take
      such decisions. 
      Even considering all the attenuating circumstances it is evident that
      the final purpose is to force the subsidiaries into  big troubles, so
      that they're forced to lay-off (do not forget EU laws are tendencially
      very protective in compareson to US ones; so US laid off thousands of
      people while EU was not taking the burden of their share..)
    
      External analysts proved that the near-to-bankrupcy status claimed by
      Germany and France, the troubled-waters declared by Italy, Belgium, 
      Holland, and almost all EU Country branches, are due to Corp. accounting
      issues, to financial losses (like the ones mentioned above) and to 
      Corp. non financing the subsidiaries (nomatter the strong Corp.
      balance sheet). This means that the Subs. have to borrow money from 
      the banks and get loaded with those extra charges too.
    
    
    4) last but not least, it is no wander that over-all profit has gone
      down in EU over the past couple of FY. Nothing moves over here unless
      approved by Corporate, since Bobby's there. 
      There is no decision power left in any Country management team; they 
      only have one mandate (and Damiani always made it very clear): to chop 
      heads off.
      People like me who've been in DEC for almost 10 years or more are 
      indeed suffering in seeing how such immobilism and cahos are destroy-
      ing our business: nothing new, you'll say, but I can assure you that 
      the effects are far more devastating if you have to wait for decisions 
      to be taken oversea, and when the guidelines come you realise they
      clearly have a US inprint that little applies to your reality.
    
    This by no means exhausts the list: still I felt I had to mention these
    points, hope I was sufficiently clear. 
    
    	Livia
    

Re: .62

There is, perhaps, a beneficial aspect of having a single strategy:
A Customer who deals with Digital in one Country can expect pretty much
the same treatment and products in another Country. With a bit of time
and luck: He could deal with Digital in any Country and get delivery
in any other Country.

For the local pop and mom store on the corner, it is of no consequence,
other than that we are probably more efficient supporting a single
strategy than N strategies and their implementations.

For the international or global accounts it DOES make a difference. 
Instead of having N purchasing departments and N adminstrations, plus
trying to achieve a consistant information strategy using N Digital
service strategies and deliverables, he can now deal with Digital once. 

To illustrate: We counted close to 1000 different service offerings
before we decided to replace these with 30 global service offerings.
These 30 service Offers include more functionality than the 1000 before
and we use consistant methods and tools to deliver. Naturall, we engineer 
the methods and tools only once and we maintain only 1 set also, using
1 Engineering group.

This allowed us, for example, to launch business initiatives to get the
global desktop business of some Customers. Products, services, the lot.
I would like to make this very clear: We now use our globally consistant
delivery capabilities to convince Customers to give us their business
on this fact *alone*. One fear I have (since I am involved in implementing
this) is that we are too succesful too soon and we can not get the people
to deliver. (Yes, really!).

We also put some of the services in a shrink-wrapped box and market that
same box world-wide (since we now can deliver consistantly world-wide). 
Turkey is selling it too. Probably would not have happened if Turkey had
to put it's own box and delivery mechanism together.

Personally, I doubt that we could have achieved any of this in the good, old
Digital where everyone can decide for himself what business he wants
to be in and allocate the investment dollars to support it.

It remains to be shown how competitive and profitable the standard Service
Menu and service delivery methods are, versus the previous way of giving
every Customer exactly what he wants. But let me put it this way: I am
willing to take bets.

Al

re.63:

>There is, perhaps, a beneficial aspect of having a single strategy:

I'm not convinced we have a single stratgey. For example, who else, apart 
from the UK, have closed down DECdirect?

Dave.

    re .64: Germany.
    
    

    
    	I thought that DECdirect had closed in all of Europe and EVERYTHING
    is going over to selling through Partners.
    
    				Malcolm.

    I think so. Same in France.
    

    DECDirect has closed in Belgium.
    
    Laurie$in_Brussels.

    Has anybody seen a/the Q&A from the stockholders meeting yet?
    
    re roelof

At least the situations clear in Europe but what about in the U.S.? 

Also, what measures were taken in various countries to ensure a smooth 
migration from our main fulfilment channel to the new 3rd party channel?
Or did they just switch off DECdirect?

Dave.

    Re. .63,64 >>There is, perhaps, a beneficial aspect of having a single
    strategy:
    
      Like our worldwide advertising strategy just announced? Chris Conway,
    territory manager in UK, has been going around telling people at
    meetings that 'there are no plans for tv advertising here'. Do you
    think somebody hasn't told him?
    
    Ken

    
    	Dave, there is a lady in an office not 20 paces from where you now
    sit, who could give you the current situation and plans if you take the
    time to ask.
    
    				Malcolm.

re.72:

I know the UK situation thanks Malcolm.

Dave ;-)