Conference 7.286::digital

4016.0. "Q4 and FY 95 Results" by IJSAPL::63212::PC240633 (Michel van Buitenen) Tue Aug 01 1995 10:39

   
         Digital today reported net income of $160 million, or $1.01 per 
   common share, for the fourth quarter which ended July 1, 1995, compared 
   with a net loss of $160 million, or $1.22 per common share, for the 
   same period last year, excluding restructuring charges and other 
   non-recurring items.
         Total operating revenues for the quarter were $3.75 billion, 
   compared to the $3.92 billion reported for the comparable quarter a 
   year ago.  Adjusted for divestments, revenue from ongoing businesses 
   grew 1 percent compared with the same period last year.  The quarterly 
   result reflected a shift in seasonality patterns as the company 
   successfully moved a larger portion of its product distribution to 
   indirect channel partners and changed its direct sales force 
   measurements.  For the year, operating revenue was $13.81 billion, up 3 
   percent from the $13.45 billion reported in the 1994 fiscal year, or 6 
   percent, adjusted for divested businesses.
         Gross margin for the quarter was 32.4 percent, compared with 29.9 
   percent for the comparable period in the prior year and 32.2 percent in 
   the third quarter. 
         Total operating expenses for the quarter decreased to $1.043 
   billion from $1.321 billion, or 21 percent, compared with the same 
   period last year.  
         The balance sheet continued to strengthen as Digital ended the 
   quarter with $1.6 billion in cash, an increase of $421 million, or 36 
   percent, compared with last year.
         The corporation ended the quarter with approximately 61,700 
   employees -- a reduction of 16,000 positions, or 21 percent, since the 
   same period last year. 
         "For the first time in five fiscal years, Digital has reported 
   net income for the year.  In addition, this is the fourth consecutive 
   quarter of operating results improvement and the third consecutive 
   quarter we've reported a profit," said President, Chairman and Chief 
   Executive Officer Robert B. Palmer.  "We are particularly pleased with 
   the turnaround we have engineered within our core systems products 
   business.  Digital's recovery continues to progress on our aggressive 
   plan.
         "We are transitioning from a period of financial turnaround and 
   recovery into a strategic growth phase," Palmer added.  "I am 
   encouraged with our fourth quarter results and the significant progress 
   we've made in a relatively short time.  However, we still have more 
   work to do."
         Product revenues were down 4 percent in the quarter to $2.132 
   billion from $2.225 billion in the fourth quarter of the previous year. 
   Adjusted for divestments, product revenue from ongoing businesses was 
   up 5 percent and represents the fifth consecutive quarter of 
   year-over-year product revenue growth on this basis.  Service revenues 
   were $1.618 billion, compared with the $1.698 billion reported in the 
   same period last year.
         Palmer said the company recorded strong performance in its Alpha 
   systems and its Multivendor Customer Services businesses.  Alpha 
   product revenues grew by 32 percent over the prior year, driven by 
   strong market demand for AlphaServer systems running Digital UNIX, 
   OpenVMS and Windows NT operating systems.  The company also recorded 
   strong results in its network and storage subsystems product 
   businesses.
         In April, Digital unveiled the computer industry's most powerful 
   server systems aimed at both technical and scientific applications and 
   enterprise-wide database applications.  The new "Turbolaser" 
   AlphaServer 8400 enterprise server and AlphaServer 8200 departmental 
   server using Digital's industry leading 64-bit technology enables 
   businesses to run some database applications on Digital UNIX up to 200 
   times faster than on current 32-bit systems offered by competitors.
         "Market acceptance of our 'Turbolaser' products is very 
   encouraging," Palmer said.  "In the few months these models have been 






   available, we have experienced strong order demand.  Our midrange 2100 
   Alpha departmental servers also continue to be in high demand."
         Earlier this month, the company unveiled a complete new line of 
   workstations that spans the entire $5,000 to $50,000 spectrum of the 
   core workstation market.  The line includes models that offer 50 
   percent to 150 percent higher application performance than competing 
   models, along with new 3-D graphic options and multimedia enhancements. 
   The top-of-the-line AlphaStation 600 models are powered by Digital's 
   Alpha 21164 RISC microprocessor, the industry's first to process more 
   than one billion instructions per second.
         "Clearly, the AlphaStation 600 puts Digital far ahead of its 
   major competitors in terms of both absolute performance and price 
   performance," Palmer continued.  "Combined with our AlphaServer 
   systems, we now have a full-range of superior technical and commercial 
   computing solutions for all aspects of the market."
         After 12 quarters of explosive market share gains, revenue growth 
   in the personal computer business moderated in the fourth quarter.
         "With our Digital PC business at an annual run rate of $2.5 
   billion, we expect both continued progress and to capture additional 
   market share in the 1996 fiscal year," Palmer said. "During the quarter 
   we took steps that were necessary to position Digital's PC business 
   infrastructure for its next growth phase, which requires a balance of 
   profit improvement, cash utilization and market share gain."
         Adjusting for divested businesses, Digital achieved very strong 
   product revenue growth in Asia/Pacific markets and modest growth in 
   Europe.  On a year-over-year basis, product revenue declined slightly 
   in the United States.
         Product gross margin was 31.2 percent, compared with 28.7 percent 
   in the third quarter of fiscal 1995 and 25.2 percent in the fourth 
   quarter of fiscal 1994.  Improvement was driven by continued cost 
   controls, stable pricing practices and a favorable mix shift towards 
   AlphaServer products.  Service gross margin was 34 percent compared 
   with 36.7 percent in the third quarter of fiscal 1995 and 36.1 percent 
   in the comparable period last year, reflecting a change in business mix 
   towards new multivendor service and support offerings.  
         "As the U.S. dollar continued to be weak in a number of 
   countries, we experienced a 3 percentage point favorable impact on the 
   company's revenue from the third to fourth quarter," said Vincent J. 
   Mullarkey, vice president and chief financial officer.  "Non-dollar 
   denominated costs and competitive responses, however, substantially 
   offset the positive impact."
         Mullarkey said the company continued with its program to improve 
   asset management and for the second consecutive quarter generated a 
   positive cash flow from operations before restructuring.
         "I am pleased with the speed with which we have made 
   corporate-wide changes," Mullarkey said.  "Digital at the end of the 
   1995 fiscal year is much stronger financially than a year ago.
         "Our product and service offering is at its strongest ever and we 
   are gaining share in our strategic markets," Mullarkey continued.  "Our 
   restructuring remains on our aggressive plan and we continue to 
   strengthen our balance sheet.  All of these points are clear proof that 
   we continue to make solid progress towards our short term financial 
   goals."







   Product sales................   $    2,132,347           $    2,224,702
   Service and other revenues...        1,617,520                1,698,272
   Total operating revenues.....        3,749,867                3,922,974
   Cost of product sales........        1,467,622                1,663,840 
   Service expense and cost 
     of other revenues..........        1,066,945                1,084,462 
   Research and engineering 
     expenses...................          252,977                  338,915   
   Selling, general and 
     administrative expenses....          789,725                1,292,071   
   Restructuring charges........             -                   1,206,000
   Operating income/(loss)......          172,598               (1,662,314)
   Net interest expense.........            7,693                   10,335
   Income/(loss) before income 
     taxes.....................           164,905               (1,672,649)
   Provision for income 
     taxes.....................             5,139                   73,711      
   Net income/(loss)...........           159,766               (1,746,360)
   Dividend on preferred 
     stock......................            8,875                    8,875 
   Net income/(loss) applicable 
     to common stock............   $      150,891           $   (1,755,235)
   Net income/(loss) applicable 
     per common share (1).......   $         1.01           $       (12.64)
   Weighted average common 
     shares outstanding.........          149,931                  138,905 
                         
                 






                                          TWELVE-MONTH PERIOD ENDED        
                                     JULY 1, 1995             JULY 2, 1994
 
   Product sales................   $    7,616,441          $     7,191,251 
   Service and other revenues...        6,196,621                6,259,539 
   Total operating revenues.....       13,813,062               13,450,790
   Cost of product sales........        5,397,723                4,968,025 
   Service expense and cost of 
     other revenues.............        3,993,970                3,943,612 
   Research and engineering 
     expenses...................        1,040,028                1,301,347 
   Selling, general and 
     administrative expenses....        3,272,913                4,027,869 
   Restructuring charges........             -                   1,206,000
   Operating income/(loss)......          108,428               (1,996,063)
   Net interest expense.........           32,771                   23,931
   Income/(loss) before income 
     taxes and cumulative effect 
     of changes in accounting 
     principles.................           75,657               (2,019,994)
   Provision for income taxes...           18,342                   85,043
   Income/(loss) before 
     cumulative effect of changes 
     in accounting principles...           57,315               (2,105,037)
   (Benefit)/charge due to 
     cumulative effect of changes 
     in accounting principles...          (64,503)                  51,026
   Net income/(loss)............          121,818               (2,156,063)
   Dividends on preferred stock            35,500                   10,650
   Net income/(loss) applicable 
     to common stock............   $       86,318          $    (2,166,713)
 
   Per common share (1):           
   Income/(loss) applicable 
     before cumulative effect of           
     changes in accounting 
     principles................    $         0.15          $        (15.43)
   Benefit/(charge) due to 
     cumulative effect of changes 
     in accounting principles...             0.44                    (0.37)
   Net income/(loss) applicable 
     per common share...........   $         0.59          $        (15.80)
   Weighted average common 
     shares outstanding.........          146,331                  137,090 
 
   Note (1):  Per common share amounts are calculated based on the weighted 
   average number of common shares and common share equivalents outstanding 
   during periods of net income, after deducting applicable preferred stock 
   dividends.  Per share amounts are calculated based only on the weighted 
   average number of shares outstanding during periods of net loss, after 
   deducting preferred stock dividends.                    

   (in thousands except per share data)                  
                         
   Cash and cash equivalents........               $     1,602,148 
   Accounts receivables, net........                     3,219,082 
   Inventories......................                     2,053,620 
   Prepaid expenses, deferred income 
     taxes and other current assets.                       397,047 
   Total current assets.............                     7,271,897 
   Property, plant and equipment,net                     2,268,722 
   Other assets.....................                       406,533 
   Total assets.....................                     9,947,152 
   Bank loans and current portion of
     long-term debt.................                        14,371 
   Accrued restructuring costs......                       492,046 
   Total current liabilities........                     4,246,292 
   Long-term debt...................                     1,012,885 
   Postretirement and other 
     postemployment benefits........                     1,159,679 






   Total liabilities................                     6,418,872 
   Stockholders' equity.............                     3,528,280 
   Book value per common share......              $          20.89 
   Non-U.S. revenues................QTR           $      2,512,275 
                                                  or           67%
                                    YTD           $      8,998,552 
                                                  or           65%
                         
   Employee population (approximately)                      61,700 
























                       FOR DIGITAL INTERNAL USE ONLY
 

.0 was taken from LiveWire. 

Ok, so we made a profit in Q4 and FY 95 but overall I guess
the figures are lower than expected, aren't they ???
Really makes you wonder what tomorrow's DVN is all about..

regards,

Michel van Buitenen
Utrecht
The Netherlands

    According to CNBC the results were .09c less than expected. 
    
    Is it time to sell?
    
    Little Tex.

    Your requested quote...courtesy of PC Quote and SpaceCom Systems
    
    DIGITAL EQUIPMENT CORP 
    
    Symbol   : DEC    
    Exchange : New York 
    
    ===[ Last Trade ]====================================
       Price : 40  1/8     *Change: +1  3/4  
       Bid   :      Ask   : 
       Size  : 300          Time  : 9:50 
    
    ===[ Daily Record ]==================================
       High  : 40  1/8      Low   : 
       Open  : 38  9/16     Volume: 425000 
    
    ===[ Misc Data ]=====================================
       Previous Close : 38  3/8  
    
    * Net Change is difference from Previous Close.
    
    

    So if I read the report right we made about $121,000 for the year??
    

    You missed some noughts off - it was $121m net income, after losses
    exceeding $1BN last time around.
    
    

I read in DIGITAL_INVESTING that the latest Forbes had an earning est. of
$1.01/share based on an average of analysts, and it was right on.

    
    It was $160 million for the quarter, and 86,318 for the whole fiscal
    year. Or about 59 cents a share.

    
    should have read 86,318 million.

| I read in DIGITAL_INVESTING that the latest Forbes had an earning est. of
| $1.01/share based on an average of analysts, and it was right on.

Makes you wonder if the numbers we announced were not fabricated to meet
the average expectations. With fabricated I mean creatively tuned by
reallocating certain buckets backwards and forwards to/from Q1 to either
buy time or to give Q1 a better start ..

>Per

	Well, whatever happened, Wall St. seems to like it. Here is the
	3pm update:

Symbol        : DEC          Exchange    : New York Stock Exchange (NYSE)
Description   : DIGITAL EQUIP CORP
Last Traded at: 40.6250      Date/Time   : Aug 01  3:04:32
$ Change      : 2.2500       % Change    : 5.86

Volume        : 1796900      # of Trades : 556
Day Low       : 39.1250      Day High    : 40.8750
52 Week Low   : 19.3750      52 Week High: 49.5000

							mike

    According to the Dow Jones headlines on MCI Mail, we may not
    have done as well as expected.
    
    --Digital Equipment Quarterly Net
         Fell Short Of Street Estimates
    
    It's kind of strange that we fell below estimates, but that Wall St.
    still seems to like the results.  Of course, lots of things about
    Wall St. are kind of strange.

    <--- Last sentence. Understatement of the year.

    Who cares what Wall Street thinks?  I'm being somewhat facetious. What
    really matters is that we finally made a profit for the year.  Let's 
    bang the drums...and tell our customers.
    

    
    I hate to be a party-pooper, but if you read closely, revenues _fell_.
    Digital showed a profit because they axed 16,000 employees.
    As they say, every silver ligning has a cloud.
    
    fred();

    Revenues fell before correction for divestitures.  After that
    correction, revenues rose (very) slightly.  Product sales revenues rose
    (if I remember right from reading 2+ hours ago) rose 5%, while service
    revenues declined.

    Christ, I'd hate to see how gloomy this string would be if we had
    *lost* money.  C'mon, kids!  Pop a cork, toot a horn, *yell* a little
    bit!
    
    Please, Roelof...have someone hose these people down with Prozac, will
    ya?

    Most analysts I read/heard were looking for 1.05 to 1.10, so 1.01 fell
    "short" of that...
    
    
    fwiw,
    
    kp
    

    
    	For what it's worth (the old FWIW), I think making a profit for the
    * WHOLE FISCAL YEAR * is worth getting excited about. For you
    youngsters, the last time that happen around here was five years ago.
    
    	Sure beats red ink.
    
    	Tex, pop me another Lone Star there, buddy....
    
    
    			the Greyhawk

It says something, though, when you ax a bunch of people and revenues for
the year still goes up. 

- Bryan

P.S. YES, I know a bunch of good people where let go and I'm NOT implying
at all that they were all deadwood.

    RE: .14
    
    Of course, revenues fell.  We don't sell as many products as we used
    to.  Whats wrong with that?  Its really misleading to judge revenues
    from quarter to quarter when the company has fewer products it is
    selling.  As long as we make money on the ones we do sell...
    
    				-John
    

    As one who follows the market closely, I have found that virtually
    every company whose earnings fall short of analyst's estimates
    (especially when the market is considered to be high, like now) takes a
    hit on the stock price.  Digital did NOT, but showed a 2 point gain.
    
    Perhaps some of the "negative" people would care to explain this
    abnormality.
    

	re: -.1

	from the Boston Globe:

	"Analysts surmised that investors had been bidding down the
	stock in anticipation of bleaker news."

	_kelley

>	"Analysts surmised that investors had been bidding down the
>	stock in anticipation of bleaker news."
    
    They can buy their own beer.

    
    Nightly Business Report:
    
    "Digital was a very nice suprise with earnings much higher than
    expected after huge losses a year ago".
    
    fred();

    Wall Street Journal:
    
    "Digital Equipment Boosts Turnaround By Reporting Profit of $160
    Million"

    Digital Shares just opened today at $45 up 4 5/8

    
    <--- due to Microsoft/Digital allience, mostly, earnings didn't hurt
    either.
    
    Mark

    I'm with Greyhawk - its GOOD news. Now, how about repeating it next
    year !
    
    Alan

    There's some more good news that didn't seem to get much play, at least
    around here (New England).  After the Aug 2 announcement, (re: Note 4012), 
    Dow Jones sent out a story that Chicago Corp. had upgraded (DEC) to "buy" 
    from "hold."
    
    Quoting:
    "Analyst David Wu cited an afternoon conference call between Microsoft
    Chairman, William Gates and Digital Chief Executive Robert Palmer for
    the upgrade.  Wu said he is bullish about Digital for the first time 
    in 5 years and the strategic technological alliance of Digital and 
    Microsoft makes him much more optimistic for the Maynard, Mass., 
    company's future. Chicago Corp said it had a price target of 60...
    (and expects Digital)...will earn 50 cents a share for the first 
    quarter ending September and $4.50 for fiscal 1996."
    
    Wu bullish?  Talk about a 'turnaround!'  Wu has been consistently 
    negative, even after the earnings the day before.   Sadly, the stock 
    price did not surge upon Mr. Wu's analysis. 
    
    $60, huh?  Hummmm....where's that broker's number?
    
    TT.
                  

    
    Is David Wu tapping our phones?

For me, the best news was that, at long last, the SG&A expense 
numbers were way down.  After so many years of belt-tightening 
layoffs, and charges against earnings, only to see that overhead was 
up yet again, it's a refreshing change.

--PSW

    The good news: Q4 net profit $160mil
                   3 positive quarters
                   end the year in the black
    
    The bad news:  non-competitive salaries for awhile longer
                   (just $1.00 an hour raise per employee last year
                    would have kept us in the red)