Conference 7.286::digital

    
    	Don't know about revenue, don't know about layoffs (I'm sure more
    are to come) but we're losing people (resignations)
    	right and left. One Sales unit has gone from 7 to 3 people in the 
    	last two months. Not sure how they're going to cover the account,
        it's a large and important one too. Sad, really sad, good people 
    	walking out the door.
    
    	RC
    

    	So, how is Q2 going? We are close to the end of it. It shouldn't be
    that bad according to the share price...

    
    I think it was Prudential Securities on the Prodigy line predicted
    a .28 per share loss for Q2.
    
    Don't ask me how they know, that's just what is posted in the computer
    business news. Under "Dec" of course, not Digital.
    
    
    
    

    
    	That works out to about a $40MM loss for the quarter which would be
    *real* good if its the operating loss. Considering we collected big
    bucks from Oracle ($108MM) and Quantum ($360MM) in Q2, if it is NOT an
    operating loss we are in deep sneakers.
    
    	One bright spot, however, I noticed a definite pick-up in VAR
    inquiries to carry our Alpha Server products. So... who knows?
    
    		the Greyhawk

If the loss comes in under $50 million it will be a moral victory at this
point.  Let's hope for that.  The big question is will it be sustainable?

I wonder how much more can be sold off to raise cash after all the previous
machinations?  The McNulty group that my organization is in still looks
like a tentative possibility (else why not just fold us into MCS?), but
other than that and maybe a few more software product groups, it's getting
to look like we may be down to the "core competencies"...

- paul

If there's any loss, it should mean Bob Palmer's head.  He has publically
committed to me, a shareholder, that he would achieve a profit in fiscal Q2 and
"sustained profitability" in fiscal Q4.

>================================================================================
>Note 3553.4                         Q2 Status                             4 of 6
>SWAM1::MEUSE_DA                                      10 lines  20-DEC-1994 19:08
>--------------------------------------------------------------------------------
>                               -< crystal balls >-
>
>    I think it was Prudential Securities on the Prodigy line predicted
>    a .28 per share loss for Q2.
>    
>    Don't ask me how they know, that's just what is posted in the computer
>    business news. Under "Dec" of course, not Digital.

    He did?  To you personally?  I didn't hear of him saying that
    to anyone else.
    
    					Steve

As reported by Reuters on May 6, 1994, "DEC chief executive Robert Palmer also
set a deadline to have the company return to profitability by the end of the
calendar year, the Wall Street Journal said."

As reported by DJ-AP on July 26, "The company still has the goal of attaining
profitability by the end of calendar 1994, Chief Executive Robert[sic] said in
a teleconference with reporters."

Then, on October 19th, DJ reported, " Digital Chairman Robert Palmer said the
company's goal is still to achieve profitability by the fourth quarter.  He
expects the computer maker to return to sustained proffitability by the end of
fiscal 1995 on June 30."

Complete citations are available upon request.

BobW

>================================================================================
>Note 3553.8                         Q2 Status                             8 of 8
>QUARK::LIONEL "Free advice is worth every cent"       4 lines  28-DEC-1994 18:56
>--------------------------------------------------------------------------------
>
>    He did?  To you personally?  I didn't hear of him saying that
>    to anyone else.
>    
>                                        Steve

I'd guess, rereading the quotes, that I misstated two things:

First, Bob Palmer did not say those things to me directly and personally.  I'm
depending on reportage and items such as transcripts of televised employee
forums.  If Dow Jones and Reuters misquote Bob Palmer, I can only go on what I
read.

Secondly, these are company goals and goals can be missed.

On the other hand, it is very clear that he and the company want to achieve
profitability this quarter, and, as a shareholder, that has set my
expectations.

BobW

>================================================================================
>Note 3553.8                         Q2 Status                             8 of 9
>QUARK::LIONEL "Free advice is worth every cent"       4 lines  28-DEC-1994 18:56
>--------------------------------------------------------------------------------
>
>    He did?  To you personally?  I didn't hear of him saying that
>    to anyone else.
>    
>                                        Steve

    May 6 - set a deadline.
            ^^^^^^^^^^^^^^^  (denotes a dash of commitment where I'm from)
    
    July 26 - still have a goal.
    
    October 19th - move that goal to June 30 '95, downgrade to "expectation".
    
    Coming up next..."would kinda like by '98"   :^]
    
    I'd say Withers has it nailed, Steve.  How safe would your job be if you
    were in charge of product development and did that?  Here's a "lift of
    the lid" \:^] to Withers, who stated "He publicly committed to me as a
    shareholder".  No mention of "personally" (that was you, Steve).
    
    								Tex
    
    ("I musta got a pony for Christmas, 'cause I can smell horse***t!")

I find newspaper paraphrases of what people actually said to be unreliable in
the extreme.  (Just look at the recent Jocelyn Elders case.)   I haven't
seen what I consider to be an authoritative quote from BP promising
profitability in any particular timeframe.  If he ever did say something like
that, he deserves all the abuse he gets, but I like to think that BP is
a bit smarter than that.

But even if he DID say it, I wouldn't believe it.

				Steve

    "Don't trust the Liberal media."  Damn those yellow-press Digital
    Journal people! :^]
    
    Steve looks like you don't believe he said it and even if he said it
    you don't believe it.  See any other ostrich heads down there?
    
    								Tex

    i think the time has come to pass judgement on accountability for returning
    the corporation to profitability. we've laid of tens-of-thousands, sold
    off major chunks of the company, and have been slashing expenditures
    for years. this is a "big ship" and as such turns slowly. but as an
    employee (soon to be gone) and ESPECIALLY as a stockholder, if this ship
    isn't turned around by now heads should roll. and NOT just at the lower
    rungs of the org. charts. i don't want to hear about anymore 2-4 year
    plans to right our problems. we all heard them 3-4 years ago. enough
    already.

    
    	Unfortunately that (re.-1) is probably not a very good idea.
    
    	If Digital gets a new CEO, etc. then the new CEO *must* bring in
    *their new team* which then *must* bring in their new teams, etc. and
    we all get to go back to square one and start over.
    
    	No, we are in the lifeboats with the CMC (Corporate Management
    Committee) together on this one folks. I know lots of us do not like
    the row, or bail, similies; but that's life at old Digital these days.
    
    	Look at the bright side, you could be working for the Post Office.
    
    			the Greyhawk

    How about bringing back KO!
    

    Fine, so if we're not profitable in Q2, Bob Withers will vote out Bob
    Palmer and somebody else (I forgot to look up the name) will nominate
    KO.  Anybody else going along with this "initiative"?
    
    I recently heard about Chrylser's success in turning around their
    business.  It took 10 years.  Maybe we should change that slogan that
    BP started to "Please be patient, Digital is changing."
    
    Mark

    Re .9
>As reported by Reuters on May 6, 1994, "DEC chief executive Robert Palmer also
>set a deadline to have the company return to profitability by the end of the
>calendar year, the Wall Street Journal said."
>
>As reported by DJ-AP on July 26, "The company still has the goal of attaining
>profitability by the end of calendar 1994, Chief Executive Robert[sic] said in
>a teleconference with reporters."

    All of Q2 occurs before the end of the calendar year, so I don't see how 
    you can expect Q2 to be profitable based upon the quotes here. 
    I read these quotes to mean that Q3 will show a profit.

    						Ed

    I've been working with the third-party vendors.  Basically, if they're
    ex-Digital, they're pretty good.  Otherwise, they're confused and
    confusing, and very, very difficult to work with.  Many have no way to
    exchange e-mail, get software to a client, etc., making it very kludgey
    to work with them.
    
    						mis dos centavos...Tex

DEC 37, change +0 3/4 

DJIA 3920.90, change -11.40 at 15:45. 

Report entered at Tue Jan 17 16:03:50 1995 

    DEC 37 1/8, change +0 7/8; DJIA 3930.60, change -1.70 at 16:00.
    Report entered at Tue Jan 17 16:56:08 1995.

                  Digital reports second quarter profit 
   
         Digital today reported net income of $18.9 million, or 7 cents 
   per common share, for the second quarter which ended Dec. 31, 1994, 
   compared with a net loss of $72.1 million, or 53 cents per common 
   share, for the same period last year.
         Total operating revenues for the quarter were $3.473 billion, up 
   seven percent from the $3.254 billion reported for the comparable 
   quarter a year ago.
         Gross margin for the quarter was 33.1 percent, compared with 30.2 
   percent for the previous quarter and 36.1 percent for the comparable 
   period a year ago.
         Total operating expenses decreased to $1.117 billion from $1.240 
   billion, or 10 percent, compared with the same period last year.
         The balance sheet continued to strengthen and Digital ended the 
   quarter with $1.132 billion in cash.
         The corporation completed the quarter with 65,600 employees -- a 
   reduction of 21,900 positions, or 25 percent, over the past 12 months. 
         Robert B. Palmer, president and chief executive officer said, 
   "Digital reached one of its most aggressive interim goals: achieving 
   operating profitability by the end of the 1994 calendar year.
         "The changes we have made over the past two years -- and most 
   significantly over the past six months, especially with respect to our 
   core systems business -- have resulted in revenue growth and a much 
   improved cost structure," Palmer said.  "Going forward, management will 
   continue to focus on these priorities:  sustainable profitability, 
   continued cost discipline, generation of cash from operations, and 
   revenue growth.  I am confident that we are on the right track toward 
   building a vital, energized and profitable Digital," he said.
   
		   Product revenues increase 
   
         Product revenues were up 13 percent in the quarter to $1.870 
   billion from $1.660 billion in the second quarter of the previous year. 
   This represents the third consecutive quarter of year-over-year product 
   revenue growth.  Service revenues were $1.603 billion, up slightly from 
   the $1.594 billion reported in the similar period last year.
         Palmer said product orders showed strong growth in the quarter -- 
   the fourth consecutive quarter of year-over-year growth.
         "Demand for our industry-leading 64-bit Alpha systems, 
   Intel-based personal computer systems, network hardware and software 
   products and storage subsystems continued to be strong," he said.  "We 
   recorded growth in both our domestic and international markets, 
   including very strong growth in our Asia/Pacific operations.  In 
   addition, our European operations made excellent progress in 
   restructuring business operations and positioning for profitable 
   growth."
         Palmer went on to say, "Alpha systems revenues grew more than 150 
   percent over the prior year, driven in part by strong demand for our 
   AlphaServer and AlphaStation product families, while personal computer 
   revenue growth continued to be among the industry leaders."

		   Gross margins stabilize 
   
         Vincent J. Mullarkey, vice president and chief financial officer, 
   said, "We were able to stabilize gross margins in the first quarter and 
   have managed solid improvements, especially in the product area, in the 
   second quarter compared to the prior two quarters.  Our gross margin 
   improvement program continues to have a favorable impact on our 
   financial results."
         Product gross margin was 30.5 percent, compared with 25.5 percent 
   in the first quarter of fiscal 1995 and 33 percent in the comparable 
   period last year.  Service gross margin was 36.1 percent compared with 
   35.5 percent in the first quarter of fiscal 1995 and 39.2 percent in 
   the comparable period last year. 
         During the quarter, the corporation reduced its population by 
   about 8,200 positions, or 11 percent, from 73,800 employees at the end 
   of the first quarter to 65,600.
         Mullarkey said Digital continued to increase the portion of the 
   company's revenues generated through indirect channels.  In the 
   quarter, 58 percent of product revenue was generated through indirect 
   channels, compared with 43 percent in the same quarter a year ago.
   
		   New product lines introduced 
   
         During the quarter, Digital introduced new AlphaStation and 
   AlphaServer lines that incorporate advanced 64-bit microprocessor 
   technology with PC-style advantages.  More than 6,400 applications are 
   available, with a choice of operating systems including DEC OSF/1 
   (UNIX), OpenVMS, and Windows NT. 
         In addition, the company unveiled its Pentium-based Prioris HX 
   line of highly-scalable PC servers along with two Digital HiNote 
   notebook families that redefine style and usability for mobile computer 
   users.
         In November, Digital won two prestigious "Best of Comdex" awards. 
   Digital won "Most Significant Technology" for its demonstration of 
   Clusters for Windows NT servers and was honored in the "Best System" 
   category for its new Multia Multiclient Desktop.  The company also was 
   a finalist with its AlphaServer 2100 4/275 system.
         Also in the fall, Digital was chosen to manage the worldwide 
   client/server infrastructure for the Microsoft Network.
         
   
               OPERATING RESULTS FOR THE THREE MONTHS ENDED
                             DECEMBER 31, 1994    JANUARY 1, 1994     
                                 (Q2 FY95)            (Q2 FY94)          
 
 Product Sales                $  1,869,993,000   $  1,659,924,000  
 Service & Other Revenues        1,603,266,000      1,594,155,000         
 Total Operating Revenues        3,473,259,000      3,254,079,000         
 Cost of Product Sales           1,300,280,000      1,112,292,000         
 Service & Other Expense         1,025,036,000        968,473,000         
 Total Cost of Sales             2,325,316,000      2,080,765,000         
 Research & Engineering            248,096,000        330,948,000          
 Selling, General & Admin.         869,157,000        908,688,000      
 Net Interest Expense                8,101,000          3,327,000            
 Income/(Loss) Before 
  Income Taxes                      22,589,000        (69,649,000)         
 Provision for Income Taxes          3,707,000          2,495,000          
 Net Income/(Loss)            $     18,882,000   $    (72,144,000)     
 Dividend on Preferred Stock         8,875,000            ---
 Net Income/(Loss) Applicable to
  Common Stock                      10,007,000        (72,144,000)        
 Weighted Average Shares
  Outstanding                      144,998,947        136,028,383          
 Net Income/(Loss) Per Common Share $      .07   $           (.53)      
 
 
                                          SIX MONTHS ENDED
                               DECEMBER 31, 1994  JANUARY 1, 1994  
 
 Product Sales                 $  3,522,644,000  $  3,216,928,000    
 Service & Other Revenues         3,073,087,000     3,052,099,000     
 Total Operating Revenues         6,595,731,000     6,269,027,000      
 Cost of Product Sales            2,530,946,000     2,093,707,000      
 Service & Other Expense          1,973,708,000     1,912,350,000     
 Total Cost of Sales              4,504,654,000     4,006,057,000      
 Research & Engineering             535,884,000       645,665,000        
 Selling, General & Admin.        1,705,524,000     1,780,895,000     
 Net Interest Expense                17,801,000         5,750,000           
 Loss Before Income Taxes &
  Cumulative Effect of Change                         
  in Accounting Principle          (168,132,000)     (169,340,000)       
 Provision for Income Taxes           8,059,000         6,031,000          
 Loss Before Cumulative Effect 
  of Change in Accounting 
  Principle                        (176,191,000)     (175,371,000)      
 Cumulative Effect of Change in          
  Accounting Principle              (64,503,000)       51,026,000
 Net Loss                        $ (111,688,000)     (226,397,000)  
 Dividends on Preferred Stock        17,750,000           ---
 Net Loss Applicable to
  Common Stock                     (129,438,000)     (226,397,000)        
 Weighted Average Shares
  Outstanding                       142,692,716       135,519,380          
 Loss Per Common Share                   
  Before Cumulative Effect of
  Change in Accounting Principle  $       (1.36)    $       (1.29)         
 Earnings Per Common Share on Cumulative
  Effect of Change in Accounting 
  Principle                                 .45              (.38)  
 Net Loss Per Common Share        $        (.91)    $       (1.67)  
 
 
 
           SELECTED BALANCE SHEET/CASH FLOW DATA - Q2FY95

 BALANCE SHEET:
 CASH & CASH EQUIVALENTS........................     $  1,132,178,000 
 ACCOUNTS RECEIVABLE, NET.......................        2,918,332,000       
 A/R DAYS SALES OUTSTANDING                                   76 DAYS 
 
 INVENTORIES:  RAW MATERIALS...............$621,381,000
               WORK-IN-PROCESS............. 511,405,000
               FINISHED GOODS.............. 993,931,000
                  TOTAL.........................        2,126,717,000   
 PREPAID EXPENSES AND DEFERRED INCOME TAXES.....          335,330,000
              TOTAL CURRENT ASSETS..............        6,512,557,000     
 NET PROPERTY, PLANT & EQUIPMENT................        2,648,303,000
 OTHER ASSETS, NET..............................          459,871,000
        
 TOTAL ASSETS...................................        9,620,731,000
       
 BANK LOANS AND CURRENT PORTION OF LTD..........            7,993,000 
 ACCRUED RESTRUCTURING COSTS....................          888,610,000
 TOTAL CURRENT LIABILITIES......................        4,202,481,000 
 NONCURRENT DEFERRED INCOME TAXES...............            4,758,000
 LONG-TERM DEBT.................................        1,010,811,000
 POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS ....        1,171,852,000
 TOTAL LIABILITIES..............................        6,389,902,000
 STOCKHOLDERS' EQUITY...........................        3,230,829,000
 BOOK VALUE PER COMMON SHARE........................   $        19.30
 
 NON U.S. REVENUES .............................QTR      2,264,661,000 
                                                            OR     65%
 
                                                YTD      4,191,991,000       
                                                            OR     64%      
 
 EMPLOYEE POPULATION ...........................                65,600
    

    Livewire has the *Profitable* Q2 results.  Hence the stock rise
    although the book value is shown down around $19 or so.  I looked
    pretty quickly, but did not see references to the Oracle and Quantum
    sales as "special" items and assume that these are not reported in the
    operating results.
    
    In any case, in spite of all of the other stuff going on, I think we
    should all give a yippee! 

>    <<< Note 3553.23 by OTOOA::MOWBRAY "This isn't a job its an Adventure" >>>
>                          -< and the good news is .... >-
> 
>     Livewire has the *Profitable* Q2 results.  Hence the stock rise
>     although the book value is shown down around $19 or so.  I looked
>     pretty quickly, but did not see references to the Oracle and Quantum
>     sales as "special" items and assume that these are not reported in the
>     operating results.

   Can someone knowledgable in accounting principles confirm that the
   Oracle and Quantum sales are not included in the results?  (I know
   next to nothing about accounting and have no idea how these get
   reported.  Obviously they have to get reported *somewhere* to account
   for the increase in the amount of cash we have.)

    So can anyone explain why the cost of product sales INCREASED by
    $200,000,000 over the comparable FY94 quarter?  That's roughly
    the same amount by which product sales increased.  Not being a
    finance whiz, am I wrong in thinking the cost of product sales
    should be dropping and not increasing?

    Orackle and Quantum sales affect only the balance sheet - cash will go
    up to reflect the sale. This does not affect the income statement. The
    income statement is intended to show the results of the company doing
    businss. Selling divisions is not a normal part of doing business. So,
    the results are even better than might be imagined as they reflect the
    results of ongoing operations. Not as good yet as they need to be, but
    clearly directionally significant.
    

    
    
    RE: .35  Our advertising campaign?  
    
    
    Mike

>    So can anyone explain why the cost of product sales INCREASED by
>    $200,000,000 over the comparable FY94 quarter?  That's roughly
>    the same amount by which product sales increased.  Not being a
>    finance whiz, am I wrong in thinking the cost of product sales
>    should be dropping and not increasing?

    The new products that we introduce (PC's, Alphastations and
    Alphaservers) have lower margins than the products that they replace.
    This means that when we sell a $15K Alphastation Digital might only
    see 20% as profit.  Last year when we sold a $15K DEC3000 we might
    have made a 30% profit.  The number we need to see go down is "Selling,
    General & Admin." this is the nonproduct based cost of sales.

    -Bruce 

    ps. I'm not an accountant and don't play one on TV.
     

     

    re .25... what .28 said.  Cost of sales includes raw materials and
    such.  Sell more products and that number should rise.   That's the
    good news.  That bad news is that the margins are so low, we're barely
    breaking even, even though we're making/selling more.
    
    It's nice not to see () around the bottom line number.
    
    -Steve
    

Maybe we counted the Oracle and Quantum sales as two *very big* sales and the
increas in COGS reflectes the lawyers' fees 8-) 8-) 8-)

Seriously, I've tried finding the quarterly results *with* the balance sheet
and have struck out.  Does anyone know where/if it is on the net?

BobW

Anyone have any idea about this roller coaster ride ???

Yesterday Jan 17th    
DEC 37 1/2, change +1 1/4

DEC 39 1/8, change +1 5/8; DJIA 3928.30, change -2.30 at 10:10.
Report entered at Wed Jan 18 10:12:08 1995.

DEC 38 1/8, change +1; DJIA 3927.30, change -3.30 at 10:11.
Report entered at Wed Jan 18 10:33:28 1995.

DEC 37 7/8, change +0 3/4; DJIA 3927.60, change -3.00 at 10:20.
Report entered at Wed Jan 18 10:42:14 1995.

DEC 37, change -0 1/8; DJIA 3927.30, change -3.30 at 10:47.
Report entered at Wed Jan 18 11:08:33 1995.

From:	LKGMTS::LKGMTS::MRGATE::"MRMTS::SALES::A1::PRESS" 18-JAN-1995 11:06:35.34
To:	@Distribution_List
CC:	
Subj:	Digital Reports Second Quarter Profit                                  1

From:	NAME: Press Releases                
	FUNC:                                 
	TEL:                                  <PRESS AT A1 at SALES at MRO>
To:     See Below

DIGITAL EQUIPMENT CORPORATION REPORTS SECOND QUARTER PROFIT
                                     
	 Investor Contact:  Bob Hult
	                    (508) 493-7182

	 Media Contact:     Dan Kaferle
	                    (508) 493-2195

MAYNARD, Mass. -- January 18, 1995 -- Digital Equipment Corporation 
(NYSE:DEC) today reported net income of $18.9 million, or $.07 per common 
share, for the second quarter which ended Dec. 31, 1994, compared with a 
net loss of $72.1 million, or $.53 per common share, for the same period 
last year.

Total operating revenues for the quarter were $3.473 billion, up seven 
percent from the $3.254 billion reported for the comparable quarter a year 
ago.

Gross margin for the quarter was 33.1 percent, compared with 30.2 percent 
for the previous quarter and 36.1 percent for the comparable period a year 
ago.

Total operating expenses decreased to $1.117 billion from $1.240 billion, 
or 10 percent, compared with the same period last year.

The balance sheet continued to strengthen and Digital ended the quarter 
with $1.132 billion in cash.

The Corporation completed the quarter with 65,600 employees -- a reduction 
of 21,900 positions, or 25 percent, over the past 12 months. 

Robert B. Palmer, president and chief executive officer said, "Digital 
reached one of its most aggressive interim goals: achieving operating 
profitability by the end of the 1994 calendar year.

"The changes we have made over the past two years -- and most significantly 
over the past six months, especially with respect to our core systems 
business -- have resulted in revenue growth and a much improved cost 
structure," Palmer said. "Going forward, management will continue to focus 
on these priorities: sustainable profitability, continued cost discipline, 
generation of cash from operations, and revenue growth. I am confident that 
we are on the right track toward building a vital, energized and profitable 
Digital," he said.

Product revenues were up 13 percent in the quarter to $1.870 billion from 
$1.660 billion in the second quarter of the previous year. This represents 
the third consecutive quarter of year-over-year product revenue growth. 
Service revenues were $1.603 billion, up slightly from the $1.594 billion 
reported in the similar period last year.

Palmer said product orders showed strong growth in the quarter -- the 
fourth consecutive quarter of year-over-year growth.

"Demand for our industry-leading 64-bit Alpha systems, Intel based personal 
computer systems, network hardware and software products and storage 
subsystems continued to be strong," he said. "We recorded growth in both 
our domestic and international markets, including very strong growth in our 
Asia/Pacific operations. In addition, our European operations made 
excellent progress in restructuring business operations and positioning for 
profitable growth."

Palmer went on to say, "Alpha systems revenues grew more than 150 percent 
over the prior year, driven in part by strong demand for our AlphaServer 
and AlphaStation product families, while personal computer revenue growth 
continued to be among the industry leaders."

Vincent J. Mullarkey, vice president and chief financial officer, said, "We 
were able to stabilize gross margins in the first quarter and have managed 
solid improvements, especially in the product area, in the second quarter 
compared to the prior two quarters. Our gross margin improvement program 
continues to have a favorable impact on our financial results."

Product gross margin was 30.5 percent, compared with 25.5 percent in the 
first quarter of fiscal 1995 and 33 percent in the comparable period last 
year.  Service gross margin was 36.1 percent compared with 35.5 percent in 
the first quarter of fiscal 1995 and 39.2 percent in the comparable period 
last year. 

During the quarter, the Corporation reduced its population by about 8,200 
positions, or 11 percent, from 73,800 employees at the end of the first 
quarter to 65,600.

Mullarkey said Digital continued to increase the portion of the company's 
revenues generated through indirect channels. In the quarter, 58 percent of 
product revenue was generated through indirect channels, compared with 43 
percent in the same quarter a year ago.

During the quarter, Digital introduced new AlphaStation and AlphaServer 
lines that incorporate advanced 64-bit microprocessor technology with 
PC-style advantages. More than 6,400 applications are available, with a 
choice of operating systems including DEC OSF/1 (UNIX), OpenVMS, and 
Windows NT. 

In addition, the company unveiled its Pentium-based Prioris HX line of 
highly-scalable PC servers along with two Digital HiNote notebook families 
that redefine style and usability for mobile computer users.

In November, Digital won two prestigious "Best of Comdex" awards. Digital 
won "Most Significant Technology" for its demonstration of Clusters for 
Windows NT servers and in the "Best System" category for its new Multia 
Multiclient Desktop.  The company also was a finalist with its AlphaServer 
2100 4/275 system.

Also in the fall, Digital was chosen to manage the worldwide client/server 
infrastructure for the Microsoft Network.

Digital Equipment Corporation is the world's leader in open client/server 
solutions from personal computing to integrated worldwide information 
systems.  Digital's scalable Alpha platforms, storage, networking, software 
and services, together with industry-focused solutions from business 
partners, help organizations compete and win in today's global marketplace.
                                   ####

Note to Editors:  Digital, the Digital logo, DEC, Prioris, HiNote, 
                  AlphaServer, AlphaStation and OpenVMS are 
                  trademarks of Digital Equipment Corporation.

     		  Windows NT is a registered trademark of Microsoft 
                  Corporation.

     		  UNIX is a registered trademark in the United 
                  States and other countries, licensed exclusively 
                  through X/Open Company, Ltd.

     		  Intel is a trademark of Intel Corporation.

     		  OSF/1 is a registered trademark of the Open 
                  Software Foundation, Inc.
 
CORP/95/777


                                  


    				         THREE MONTHS ENDED
  			    DECEMBER 31, 1994    JANUARY 1, 1994     
				(Q2 FY95)	     (Q2 FY94)		

PRODUCT SALES		     $  1,869,993,000   $  1,659,924,000  
SERVICE & OTHER REVENUES        1,603,266,000      1,594,155,000   	 
TOTAL OPERATING REVENUES        3,473,259,000      3,254,079,000	 
COST OF PRODUCT SALES	        1,300,280,000      1,112,292,000   	 
SERVICE & OTHER EXPENSE 	1,025,036,000        968,473,000     	 
TOTAL COST OF SALES	        2,325,316,000      2,080,765,000	 
RESEARCH & ENGINEERING	          248,096,000        330,948,000          
SELLING, GENERAL & ADMIN.         869,157,000        908,688,000      
NET INTEREST EXPENSE 	            8,101,000          3,327,000            
INCOME/(LOSS) BEFORE 
 INCOME TAXES           	   22,589,000        (69,649,000)         
PROVISION FOR INCOME TAXES          3,707,000          2,495,000	          
NET INCOME/(LOSS)	     $     18,882,000   $    (72,144,000)     
DIVIDEND ON PREFERRED STOCK	    8,875,000		 ---
NET INCOME/(LOSS) APPLICABLE TO
 COMMON STOCK			   10,007,000	     (72,144,000)	 
WEIGHTED AVERAGE SHARES
 OUTSTANDING		          144,998,947        136,028,383          
NET INCOME/(LOSS) PER COMMON SHARE $	  .07   $           (.53)                
    			                 SIX MONTHS ENDED
    		              DECEMBER 31, 1994  JANUARY 1, 1994  

PRODUCT SALES		      $  3,522,644,000  $  3,216,928,000    
SERVICE & OTHER REVENUES         3,073,087,000     3,052,099,000     
TOTAL OPERATING REVENUES         6,595,731,000     6,269,027,000      
COST OF PRODUCT SALES	         2,530,946,000     2,093,707,000      
SERVICE & OTHER EXPENSE		 1,973,708,000     1,912,350,000     
TOTAL COST OF SALES	         4,504,654,000     4,006,057,000      
RESEARCH & ENGINEERING	           535,884,000       645,665,000        
SELLING, GENERAL & ADMIN.        1,705,524,000     1,780,895,000     
NET INTEREST EXPENSE 	            17,801,000         5,750,000           
LOSS BEFORE INCOME TAXES &
 CUMULATIVE EFFECT OF CHANGE       		     
 IN ACCOUNTING PRINCIPLE          (168,132,000)     (169,340,000)       
PROVISION FOR INCOME TAXES           8,059,000         6,031,000          
LOSS BEFORE CUMULATIVE EFFECT 
 OF CHANGE IN ACCOUNTING PRINCIPLE(176,191,000)     (175,371,000)      
CUMULATIVE EFFECT OF CHANGE IN          
 ACCOUNTING PRINCIPLE              (64,503,000)       51,026,000	                    
NET LOSS		        $ (111,688,000)     (226,397,000)  
DIVIDENDS ON PREFERRED STOCK	    17,750,000		 ---
NET LOSS APPLICABLE TO
 COMMON STOCK			  (129,438,000)	    (226,397,000)	 
WEIGHTED AVERAGE SHARES
 OUTSTANDING		           142,692,716	     135,519,380          
LOSS PER COMMON SHARE 		        
 BEFORE CUMULATIVE EFFECT OF
 CHANGE IN ACCOUNTING PRINCIPLE  $	 (1.36)    $       (1.29)         
EARNINGS PER COMMON SHARE ON CUMULATIVE
 EFFECT OF CHANGE IN ACCOUNTING 
 PRINCIPLE            	                   .45              (.38)                   
NET LOSS PER COMMON SHARE        $        (.91)    $       (1.67)  




          SELECTED BALANCE SHEET/CASH FLOW DATA - Q2FY95


BALANCE SHEET:

CASH & CASH EQUIVALENTS........................     $  1,132,178,000 
ACCOUNTS RECEIVABLE, NET.......................        2,918,332,000       
A/R DAYS SALES OUTSTANDING     		                     76 DAYS 

INVENTORIES:  RAW MATERIALS...............$621,381,000
              WORK-IN-PROCESS............. 511,405,000
              FINISHED GOODS.............. 993,931,000
                 TOTAL.........................        2,126,717,000   
PREPAID EXPENSES AND DEFERRED INCOME TAXES.....          335,330,000
             TOTAL CURRENT ASSETS..............        6,512,557,000     
NET PROPERTY, PLANT & EQUIPMENT................        2,648,303,000
OTHER ASSETS, NET..............................          459,871,000
       
TOTAL ASSETS...................................        9,620,731,000
      
BANK LOANS AND CURRENT PORTION OF LTD..........            7,993,000 
ACCRUED RESTRUCTURING COSTS....................          888,610,000
TOTAL CURRENT LIABILITIES......................        4,202,481,000 
NONCURRENT DEFERRED INCOME TAXES...............            4,758,000
LONG-TERM DEBT.................................        1,010,811,000
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS ....	       1,171,852,000
TOTAL LIABILITIES..............................        6,389,902,000
STOCKHOLDERS' EQUITY...........................        3,230,829,000
BOOK VALUE PER COMMON SHARE........................   $        19.30
    

NON U.S. REVENUES .............................QTR	2,264,661,000 
							   OR     65%

					       YTD	4,191,991,000       
			               			   OR     64%                  

EMPLOYEE POPULATION ...........................                65,600


 

    
    
    Could someone explain why Service and other expenses have
    gone up since last year. 
    
    SG&A, and Engineering expense is down, yet cost of services is
    up (Far more than the revenue from services is up).
    
    					Ed
    
    

    Let me guess why the cost of service has risen...
    
    They've let go so many engineers that the survivors are incurring much
    larger travel and associated costs.
    
    The other cause of a cost increase is the continued escalation in parts
    cost for each service call.  When we were changing components the parts
    cost was, as a proportion, very low.  Then we started changing borads
    and now its units.  So whilst the technician cost has dropped the
    material cost has rocketed.

    re. 31
    
    "Buy on the rumor, sell on the news"
    
    That is how it is done on Wall Street.
    

    
    The memo in vtx states we are down to a population of 65,600.
    
    I thought that was the goal by June 95.
    
    Or was it 6,500?
    
    any comments.
    
    
    

    My only comment re: 65,600 employees is that Palmer promised us in a
    DVN that he would do everything in his power to reach that number by
    the end of December, to put an end to the downsizing as quickly as
    possible.  Perhaps he kept his word?  --S
            

    
    thx, forgot about that dvn.
    
    We didn't do as great a Chrysler, but it's still good news for a
    change.
    

    Bob Palmer was quoted in the con call with analysts as saying that he
    anticipated further cuts, "down to about 60,000 by the end of the
    fiscal year."

    We have lost 2 more from the Corning office in Q3. One to TFSO and one
    to attrition. Four years ago we had 30 people in this office. We now 
    have 4 service engineers, a logistics person 3 days a week and 2
    salesmen working from their homes. It is not unusual for me to work all
    day and not see another Digital employee.
    
                                   Steve J.

>    My only comment re: 65,600 employees is that Palmer promised us in a
>    DVN that he would do everything in his power to reach that number by
>    the end of December, to put an end to the downsizing as quickly as
>    possible.  Perhaps he kept his word?  --S

  Heard him on NPR on the way home last night saying he expected the number
  to be down to 60,000 or so by the end of this fiscal year.  That would be
  down about 58,138 since I wrote down some numbers about two years ago.

  It broke down to 12,481 in Engineering, 29,510 in Manufacturing and 76,147
  in "the field"... whatever that meant.  You know how those presentations
  go.

  	mikeP

    >The memo in vtx states we are down to a population of 65,600.
        
    >I thought that was the goal by June 95.
    
    The way I understood it was that any business sold off would lower the
    65k number.  So, if we sold off a business with 5000 employees, then
    the number would become 60k.  The rationale is that we would also be
    selling off the revenue that goes with that business, so to get to a
    certain revenue/employ. the 65k number would need to be lowered.
    
    Bing
    

Regarding 65K employees...  Since the SLT changed their metrics, contractors
are no longer figured into headcount statistics.  That's what I heard.

-Mike

    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

    ==========================================================================
    
    Perhaps I'm missing something, not being an accountant and all...

    Is the ~$400M that was received for gutting the company and selling the
    database products and storage capacity part of what made this $18M
    profit?  If so, isn't the "profit" a huge farce, artificially created
    by throwing away assets at less-than firesale prices?  Doesn't it just
    mean that the remainder of the company just had a $382M LOSS?  What
    will get sold next quarter to make it look like a profit - VMS?  OSF?  

    

re. 45
  > Is the ~$400M that was received for gutting the company and selling the
  > database products and storage capacity part of what made this $18M
  > profit?  If so, isn't the "profit" a huge farce, artificially created
  > by throwing away assets at less-than firesale prices?  Doesn't it just
  > mean that the remainder of the company just had a $382M LOSS?  What
  > will get sold next quarter to make it look like a profit - VMS?  OSF?  

I my previous education as an accountant ...
    Only the profit from the sale of this business would ever be
    recognized in any Profit/Loss Income statement... but then only
    as an extraordinary Gain/Loss which would be called out on a 
    separate line item.

    ei: If the book value of the business that we sold was $390M and
        we sold it for $400M then an extraordinary gain of $10M would
	be recorded on a special separate line on the income statement.
	Same for a loss ... if the book value was $410M ... Loss of $10M.

The real trick is trying to figure out what the real book value of the
business and its assets was.  I have heard that this was impossible
because many of the asstes etc. were shared with other businesses still
in Digital.

Phil

    re: .45
    
    > Is the ~$400M that was received for gutting the company and selling the
    > database products and storage capacity part of what made this $18M
    > profit? 
    
    No, I don't believe it is.  It contributed to the >$1B in cash that
    Digital now has, though.  Same with the storage sell-off.
    
    	Steve

    re. 43
    
    If our earnings were "inflated" by currency exchange fluctuations, then
    so were IBM, HP and SUN.  They all do a lot of business overseas.
    
    That statement, as for as I am concerned, should be attributed to a
    bunch of analyst who were far off the mark in estimating Digital's
    earnings and used this as an excuse for their poor analysis.  They were
    embarrassed.  How many of you noticed any remarks about this
    "fluctuation" in any of the competing vendors earnings reports.  
    
    Sour grapes!
    

The Globe story said, as was mentioned here earlier, that the drop mid-day
was "buy on the rumor, sell on the news".  You can see this happening
almost everywhere.

My question is - what does it say to employees when the company turned a
profit and Palmer says that we still have to give the boot to another 10%?

					Steve

    >My question is - what does it say to employees when the company turned
    >a profit and Palmer says that we still have to give the boot to
    >another 10%?
    
    To me, it sounds like the sink has been fixed so the brain drain will
    run more efficiently.  :(   It's going to be more appealing to hire
    talent from a profitable company ...
    
    Steve

    Remeber Catch-22 when the Colonel kept raising the number of missions
    on Yossarian?

>    Perhaps I'm missing something, not being an accountant and all...
>
>    Is the ~$400M that was received for gutting the company and selling the
>    database products and storage capacity part of what made this $18M
>    profit?  If so, isn't the "profit" a huge farce, artificially created
>    by throwing away assets at less-than firesale prices?  Doesn't it just
>    mean that the remainder of the company just had a $382M LOSS?  What
>    will get sold next quarter to make it look like a profit - VMS?  OSF?  

    I am going to try and make the answer as simple as possible. When you
    sell an asset(like part of our storage business) for cash you deduct
    the value of the physical asset from a line on the balance sheet
    and in this case add the money to "CASH & CASH EQUIVALENTS".  If you
    sell the asset for what you had been carrying it on your books for it
    is this simple. If you sell it for more or less, you would then have a
    profit or loss.  In Q4 of FY94 we wrote off some $300M this could have
    had something to do with the asset sales.  The sales happening this
    quarter probably didn't have much of an effect on this quarter other 
    than the reduction in headcount.

    -Bruce  

    >My question is - what does it say to employees when the company turned
    >a profit and Palmer says that we still have to give the boot to
    >another 10%?

    That $19M profit on $3.5B in revenue isn't really acceptable?


    -Bruce

I would have thought further employee number reductions will happen in
countries where they are behind the rest of the corporation in reorganising 
due to local laws. Germany and France spring to mind.

Dave.

    re .54:
    
�I would have thought further employee number reductions will happen in
�countries where they are behind the rest of the corporation in reorganising 
�due to local laws. Germany and France spring to mind.
    
    Please don't suggest further reductions in Germany - we've down from
    almost 9000 to something like 2300 (and that's not counting the closed
    factory in Kaufbeuren). Come back when you've reached the same
    percentage in US.

    	DEC France has 150 more volunteers for redundancy than they want,
    and are currently discussing with the union how to decide which 150 to
    refuse redundancy to. I think that is the reason for the current delay.

    This weeks Business Week contains an article on IBM, which basically
    states that inspite of making close to $3 billion in profits this year
    they are in trouble because the percentage of revenue they get from big
    iron has increased.  
    
    Since we Digital also make a lot of money in the traditional "big iron"
    market, does anyone have any idea how much of our profit was due to
    what looks like a one time upswing in traditional markets?

We don't move much "big iron" at all.  Sales of the VAX/DEC 10000 series have
been rather slow.  It's the low end which is shipping all we can make.

				Steve

   re: 3553.56 <PASTIS::MONAHAN>

   >DEC France has 150 more volunteers for redundancy than they want, and are
   >currently discussing with the union how to decide which 150 to refuse
   >redundancy to. I think that is the reason for the current delay.

       Gee, either work conditions (read moral) are so bad, or it must be a
   heck of a severance package being offered for 150 too many people to
   volunteer.

   Tony

    Re .59
    
    Bad morale - yes
    Good package - by DEC GMA/US standards, possibly
                   by French local standards. not sure

    re .48
    >If our earnings were "inflated" by currency exchange fluctuations,
    >then so were IBM, HP, and Sun.
    
    Probably true: Sun income was up 85% on 30% better revenue,
    for example.  As Sun, Apple (income up 300+%, margins up 5%),
    and others in the computer industry report, suddenly our report
    doesn't look so stellar.  kb

    re .48
    >If our earnings were "inflated" by currency exchange fluctuations,
    >then so were IBM, HP, and Sun.

    and .61    
    Probably true: Sun income was up 85% on 30% better revenue,
    for example.  As Sun, Apple (income up 300+%, margins up 5%),
    and others in the computer industry report, suddenly our report
    doesn't look so stellar.  kb

Not necessarily. Different organizations can use different strategies
to handle currency exchange fluctuations. Some organizations use
the fluctuations as a way to make more money. If they are skillful at
predicting the changes, they can make a lot of money.  If they are not
skillful, they can lose a lot.  Others use futures contracts to protect
themselves from loss. They then can not make any money either, and also
incur a tiny fee for the protection, very much like an insurance premium.

Mixed strategies are also possible. For each currency and each business
unit, some fraction of the money can be handled actively and the rest 
insured.

Sometimes you can learn something about an organization by how they
handle their currency exchanges.  Those that avoid risk in exchanges
have extra energy to devote to their core business and their income
stream tends to be more predictable. Those that think it is a core
competency, tend to accept the risks and manage the exchanges actively.
International banks almost have to consider it a core competency.
Successful computer companies might use any of the strategies.

re.55:

>    Please don't suggest further reductions in Germany - we've down from
>    almost 9000 to something like 2300 (and that's not counting the closed
>    factory in Kaufbeuren). Come back when you've reached the same
>    percentage in US.

I wasn't suggesting further reductions, merely refering to the problems 
Digital had encountered in some countries due to local laws, I was not 
aware that Germany was now inline with corporate wishes.

Dave (not US but UK!)

    �aware that Germany was now inline with corporate wishes.
    
    Seems like the "corporate wishes" for Germany were more stringent than
    for many other countries (I wouldn't dare to say, of course, that it
    might partially be due to earlier corporate mistakes).
    

Now that we have made a profitable quarter !!

So why doesn't Wall Street Love us anymorw ? (:-{)

DEC 33 5/8, change -0 5/8; DJIA 3874.40, change +7.00 at 15:04.
Report entered at Tue Jan 24 15:30:07 1995.

**************************************************************
DEC 32 1/8, change -1 1/2; DJIA 3852.90, change -9.80 at 9:45.
Report entered at Wed Jan 25 09:59:05 1995.
**************************************************************

>                    -< IBM coattails, again... ? maybe??? >-

   Let's see:  IBM's *profit* for this quarter was 1.4 *billion* dollars.
   What was ours again?  (And BTW, IBM is still in the software business)

    Now that digital has met its aim of being profitable
    by December 1994, what is it going for? Is there an 
    articulated profit target for the rest of the year and
    beyond, or is digital just happy NOT to be losing money? 
    
    Malcolm 
    

    re. 66
    
    Perhaps the stock got ahead of itself.  The market is usually looking
    ahead 12 months.
    
    At an annualized rate, the $0.07/share profit works out to $0.28 for
    the year.  At a $32/share stock price, that works out to a
    price/earnings (PE) ratio of 114.  Since the market is trading at a PE
    of 17, Digital is a bit pricey.  However, the market looks out 12
    months.  If the stock holds at around $32, and the market PE remains
    around 17, then analyst are expecting Digital to be earning around
    $2/share on an annualized basis 12 months from now.
    
    In late August/early September, on CNBC, Dan Dorfman reported on a
    private investor who had purchased $50 million in Digital stock.  The
    investor had a strike price of $50/share by August 1995.
    
    Since all stocks do not trade at the market PE (Home Depot, Microsoft,
    Intel), but much higher, Digital could also trade higher (NOT 114). 
    However, when a stock is trading at a PE ratio that is 4 or 5 times the
    market, the least little disappointment in earnings or sales will send
    the top down swiftly.
    
    Again, maybe the stock just got a little ahead of itself.  Patience is
    a virtue.
    

    If DEC did get ahead of itself it was on a combination of rumours and
    facts provided by analysts. As far as I recall the predictions that
    helped propell the stock to around $36 were worse than what we actually
    did report at Q2. By now we must be seeing the effects of investors
    cutting losses as opposed to short-sellers dumping?

    Somehow I have this nagging feeling that our Q2 report or the
    way by which we communicated it contained negatives worse than those
    that contributed to analyst forcasts of -$.28/share. What did we
    say that was not expected? Or what did we not say that was expected?
    What would we have had to do to maintain the price at $36? 

    >Per

  Everybody else in the computer industry made a bundle.

  We made a pittance.

                                   Atlant

    The way I look at it over all is we had to come up with 72 mill to
    brake even and add 18 mil to that for a total of 90 mil. So I look
    closer at the 90 mil than the 18 mil.
    
    But this is probably just me.

Some people are rumoring that the the profits were due in a large part
to currency situations that were favorable to Digital.

I don't know how this could be proven true or untrue...
Maybe we can get Marcia Clark and Johnnie Cochran (of O.J. fame)
to argue the evidence. ;-}

    
    
    	We reported a profit...stock went up...Palmer says we can't sustain
    	the profit...stock goes back down...pretty simple relationship
    	here.  Tha's the way i interpret it.

|    	We reported a profit...stock went up...Palmer says we can't sustain
|    	the profit...stock goes back down...pretty simple relationship
|    	here.  Tha's the way i interpret it.

	Did Palmer really say that or was he just unwilling to turn his
	objectives unto a prediction or committment?

>Per

    Profit... what profit....!
    
    The ratio of xx made on sales of xx, is like you and me finding change
    in the couch.

RE: .78 -< Couch change... >-

>    The ratio of xx made on sales of xx, is like you and me finding change
>    in the couch.

You are right about that.  But I believe that the fact (however welcome) that
we made a profit this quarter is not what is making most people feel good.  It 
is instead the fact that all of the numbers are heading in the right direction.

General revenue is up, Alpha revenue is up, net margin is better (not as much
because of the different product mix, but it is still better), SG&A is down,
money in the bank is better, etc.  And this is not just in Q2.  The numbers
have been headed in the right direction (up or down as appropriate) since
Q4FY94.  And the numbers have held their direction for 3 quarters now.

It is just that we were so far down that it took a while for the effect of
all of the numbers to break into the black.  So I am feeling pretty good
about this.  Not because of the "couch change" amount of the profit ($19M
profit on $3B+ revenue is miniscule) but because we have shown that we can
sustain the direction of positive movement.

-- Ken Moreau

    Out here in the field the part that makes us feel good about the profit
    are:
    1. This was the first "honest" profit ie, no unusual restraints on
    spending.
    2. We did business as usual with normal fiscal responsility.
    	This means no end of quarter freeze on buying normal business
    needs till next quarter. We bought/consumed what was nessesary to
    do our business.