From: price@mrktng.enet.dec.com ("Dave Price, Press Relations  01-Oct-1992 1443")
Subject: DECnews/Remarks by Robert B. Palmer, President and CEO
Date: Thu, 1 Oct 92 11:54:22 PDT
X-Received: by usenet.pa.dec.com; id AA01892; Thu, 1 Oct 92 12:34:09 -0700
X-Received: by enet-gw.pa.dec.com; id AA09259; Thu, 1 Oct 92 11:45:34 -0700
X-Received: from mrktng.enet; by decwrl.enet; Thu, 1 Oct 92 11:54:22 PDT
X-To: mail11:;@enet-gw.pa.dec.com (@decnewslist)
X-Apparently-To: distribution:;@enet-gw.pa.dec.com (see end of body)

||||||||||||  DEC n e w s  ||||||||||||||||||||||||||||||||||||||||||||||||
                                              Digital Equipment Corporation
                                          Maynard, Massachusetts 01754-2571


THESE ARE THE REMARKS BOB PALMER WILL BE GIVING AT THE
MAYNARD NEWS CONFERENCE TO THE PRESS, INDUSTRY AND 
FINANCIAL ANALYSTS ON OCTOBER 1ST.


                      "DIGITAL'S NEW DIRECTION"



Remarks by  

Robert B. Palmer
President and CEO,

Digital Equipment Corporation
Maynard, Massachusetts
October 1, 1992


Welcome and thank you for your interest in Digital.  

DIGITAL is going to change.  

It's time for a clear direction with a focus on meeting our 
customers' needs.  It will take time to bring about all the changes 
that are necessary, but we will begin today.

This morning's session is the start of an ongoing dialogue that I 
expect will lead toward a positive open relationship between us.

I value your views and insight, and I intend to be as willing to 
listen to you as I am to share my thoughts.  Today, I would like to 
talk about some of the principles that will guide my management of 
Digital as we return to profitable growth.  

Remember that Digital has had a profound impact on the computer 
industry for 35 years. Digital pioneered interactive computing and 
changed the way people use computers.  We were one of the first to 
understand the importance of networking, and interoperability across 
a wide range of systems.  And we built a global delivery and service 
infrastructure  to serve our customers that is the envy of many of 
our competitors.  And Digital will have a powerful impact in the 
future as well.  It is true that we shall do so in dramatically 
altered circumstances.  

At the least, Digital is facing a much more competitive environment 
than it has ever faced before.  Driven by open systems and by 
breakthroughs in silicon technology, a massive change has been 
sweeping through our industry.  The historically high margins on 
hardware and the business model upon which Digital was built are no 
longer sustainable.  

As computer hardware performance skyrockets, open systems and the 
competitive process are driving down prices and squeezing margins, 
requiring that we lower our cost of doing business.  We understand 
that very clearly.  It comes to us in the almost paradoxical 
messages that we get from our customers.

In terms of hardware, customers have never been as empowered to 
control the market as they are today.

At the same time, the rapidity of technical change and the 
difficulty of integrating divergent systems, has had an unsettling 
effect on many customers.  Some customers are outsourcing --
delegating total management of their computers to us.  Others are 
seeking a greater level of advice, support and partnership from us 
than ever before. 

The implications of supporting customers in these and all other 
situations must be the same for us:  THE CUSTOMER MUST BE THE 
PRIMARY FOCUS OF EVERYTHING THAT WE DO.  This dictates measuring our 
strategy against relatively simple criteria: first, does it help us 
more effectively meet customer needs; second, does it enable us to 
be more competitive as a company.

Using these criteria, Digital is putting its emphasis on services, 
software, networking, silicon and open systems.  And we will match 
the appropriate sales and distribution channels to the appropriate 
products and services.  

All customers want excellent products, at low cost, with fast 
delivery.  Some want more complex solutions to increase their 
competitive advantage in their industries.  We know how to provide 
these solutions, which often require our leading networking, and 
multivendor service capabilities on a global basis.  We understand 
that customers do not have to buy from Digital.  They have many 
alternatives.  

As a result, we are organizing and focusing ourselves in such a way 
that customers prefer to buy from Digital -- prefer us because we 
not only have the best solutions for our customers, but because we 
stand behind them.  The focus is on delivering what will add value 
to our customers in a way that makes it easy for them to buy.  This 
means that each part of the company must operate to standards of 
quality, excellence, profitability, and competitive differentiation 
that fits its unique business model.  

PCs are a good example.  Our original entrance into that business 
was rocky at best.  We have had to learn how to succeed in a 
customer driven, commodity business with low margins where 
differentiation may be in distribution or manufacturing costs.  
We re-entered this market with high quality, Digital PCs that were 
outsourced for manufacturing to our specifications.  With favorable 
response by customers to our products and product quality, we turned 
to low cost distribution --  building on and extending our direct 
marketing and teleselling capabilities.  

First, we set some simple goals: give the customer a quality 
solution, then make it easy to purchase.  And we're doing well; as 
some of you have noted, Digital is now the largest mail-order 
computer vendor.  And by now using our own design and low cost PC 
manufacturing, we have increased our competitiveness.  Digital's 
manufactured PCs have been very well received,  and we expect that 
success to continue.

The lessons we are learning from the PC business are being applied 
elsewhere.  We are committed to the concept of being customer 
driven.  As our customers demand more, we intend to deliver what 
they tell us they need.  For example, customers are demanding open 
systems -- open systems are driving this market.   Digital will 
therefore do whatever has to be done to be a leader in open systems.

In addition, we are aggressively investing in systems integration 
and consulting expertise.  Digital's SI business is growing at more 
than 20% per year and is profitable.  It represents an excellent 
opportunity, exceeding $2 billion dollars in revenue in our fiscal 
year.  The SI business can be even more profitable and we'll see 
that it is.    

We will continue to focus here, and in our multivendor service 
capabilities.  We now service more than 10,000 hardware and 
software products from 1,300 different vendors.  And that number is 
growing.  Digital does a better job integrating multiple vendors' 
hardware and software products than anyone else in the industry, and 
we will continue to focus on that capability.  That means continued 
development of the Network Application Support, or NAS software, 
necessary to accomplish that task, and continued improvement of our 
overall networking capabilities.  We are committed to expanding our 
industry-focused applications by substantially growing the number of 
our software partners.

In addition, Digital's application integration frameworks like 
DECunity in the utilities industry, DECtrade in financial services, 
and Healthnet in the healthcare industry add clear value for our 
customers and will continue to distinguish Digital's marketing and 
technology approach.  

The resources to invest in high value-added, higher profit 
activities like systems integration, multivendor networking and 
software integration will in part stem from the disinvestment in 
other engineering efforts, particularly in hardware.  

Digital's 1.8 billion dollar engineering investment is one of the 
largest in the world. We are committed to analyzing and refocusing 
that investment.  Our plan will be to reduce and re-allocate funds 
to support research and development that promises to satisfy 
customers in the long run AND provide an appropriate level of 
return.  This will be a cultural change for Digital.  It will 
require focus, discipline, and excellent management systems and 
skills.

To this end, we will shortly announce a Vice President of 
Engineering whose role will be to rationalize our hardware and 
software investments and ensure that they support our strategic 
intent.

For example, we think there is opportunity for rationalization of 
our hardware investment through simplification and modularity. Our 
practice of empowering engineering groups to design their own unique 
solutions for some segment of the marketplace has often resulted in 
product overlap and redundancy.  We will eliminate redundancy and 
simplify our product set.  Part of this effort will be supported by 
new approaches to modular computing and flexible manufacturing.  
This will allow us to respond to customer demand by putting 
subsystems together in a wide array of cost effective, flexible 
combinations.  

Inevitably, a focus on those core technologies where we do 
exceptionally well means NOT focusing on some others -- also a 
cultural change.  Digital will stop trying to do everything for 
everybody all the time, everywhere.  We will work more closely with 
our strategic partners, like Microsoft and Olivetti.

We are also moving closer to our resellers and Original Equipment 
Manufacturers (OEMs) and using them more effectively.  And we are 
recommitting, and if necessary reinvesting, in our applications 
partners.  In fact, we are working with and supporting every 
conceivable channel that will help us be more effective in 
delivering our products and services in a timely and cost effective 
manner.  This is especially true as we continue to roll out Alpha 
AXP, the next major generation of computing.  

Alpha AXP systems are themselves the fruit of major investments in 
design tools, simulation and verification tools, process 
development, and manufacturing technology that has paid off. Having 
a relatively small, captive semiconductor operation produce the 
world's fastest microprocessor ... and having the circuits work the 
first time... is an astounding feat.  I don't know of any other 
semiconductor company that has been able to do that.  Digital will 
continue to invest in semiconductor technology and manufacturing as 
a core competency.

Having the industry's 'hottest' chip, of course, is only part of the 
job.  Making Alpha AXP a "universal computer", operating effectively 
with multiple operating systems like UNIX, NT and OpenVMS is also 
important. To complete the job for customer needs means having the 
applications, software, system, and service and making it all easy 
to buy.  We will deliver these, as well as all our other products 
and services,  according to the highest standards of excellence in 
the industry.

To summarize our product and service strategy: 

    o	our focus is to continue to invest in services, software, 
        networking and silicon;

    o	rationalize and modularize our hardware offerings; 

    o 	to provide the sales and distribution mechanisms appropriate 
        to our business models and the way our customers want to 
        buy; 

    o	to lead the industry in multivendor interoperability and 
        integration; 

    o 	to lead in Open Systems supporting UNIX, NT and OpenVMS, and 

    o 	to keep the focus at all times on delivering complete 
        solutions for our customers.

Of course, as Digital implements these strategies, my immediate task 
is to ensure the return of this enterprise to profitable growth. I 
know your expectations of Digital are high.  Our shareholders and 
customers want stability and financial strength.  All of our 
stakeholders are very interested in our return to profitability.  
And rightly so.  I strongly believe it is a privilege and 
responsibility to invest other people's money.  It is something we 
must do wisely, and shareholders have every right to expect a 
reasonable return on their investment.

Looking at the numbers of late, you might be left with a sense of 
pessimism.  But I think there is some good news as well.  We have 
the strongest balance sheet in the industry with $5 billion of 
equity and virtually no debt.  Our debt to total debt plus equity 
ratio was less than 2% at the end of the last fiscal year.  Digital 
has always had and will continue to have a conservative financial 
structure.

Moodys and Standard and Poor's have both recently recognized our 
long term viability publicly.  Of course, our strong financial 
position does not mean that we will take our eyes off reducing costs 
even for a moment.  Quite the contrary.  Reducing unnecessary 
expense is vital for profitable growth.  And we are looking at every 
expense -- whether large or small, weighing its necessity, 
evaluating its return,  and examining its importance.  We will be 
deliberate in our efforts to further reduce costs.

But cutting costs is not enough.  We must also be sure that every 
activity in Digital adds value as measured by our customers. We know 
this, and we are examining every step in our supply chain, including 
product creation, manufacturing, distribution, supplier management, 
sales, marketing ... everything.  

And we are already finding more efficient and productive ways to do 
things than we had previously thought possible.  In manufacturing, 
for example, we have disinvested in the number of facilities we 
operate, downsized our worldwide population, and 'spun out' part of 
our operations.  

At the same time, we were able to improve our capabilities and the 
quality of our products.  This was accomplished by examining the 
core competencies we needed to succeed in the 1990's.  For example, 
we have a core competency and commitment to maintaining our lead in 
microprocessor design and manufacturing.  So we are investing in a 
new semiconductor manufacturing facility in Hudson, Massachusetts.  

On the other hand, redundant efforts in process technology in an 
area that did not provide competitive differentiation allowed for 
the disinvestment of our Greenville, South Carolina printed wiring 
board facility.  The sale of that facility saved jobs and reduced 
costs, while maintaining access to necessary printed wiring boards. 
Supply chain re-engineering is the process we are applying to every 
part of Digital in order to become more competitive.  This work will 
impact our workforce.  But we are not using a 'top down', fixed 
number approach to sizing our workforce.  

Business managers are determining what sets of skills and knowledge 
and what size workforce they need to become more competitive. And 
while we're not working with a fixed time limit, we recognize the 
urgency of this process, and are moving expeditiously.  We are 
committed to providing meaningful work for all our employees.  This 
translates into a smaller, more focused workforce.  Re-engineering 
the work is part of the process of understanding what value each 
activity provides for our customers.  Re-engineering is a necessary 
step in becoming competitive and returning to profitable growth, and 
this process will result in the:

    o	simplification of products, services and business practices,

    o	elimination of redundancies,

    o	substantial cost reductions and increased productivity,

    o	investment in areas that differentiate us and strengthen our 
        core competencies, and 

    o	disinvestment in areas that do not.

Before I take your questions, I would like to provide an answer to 
questions I frequently receive about my management agenda and 
personal style.  First and foremost on the agenda is the aggressive 
transformation of the company to align itself with the changing 
market and new technology ... in order to meet customer needs more 
effectively.  A customer focus will drive everything that we do.

It is very clear to me that a successful customer focus requires a 
renewed dedication to excellence in sales and marketing.  
Establishing this excellence is a personal commitment and will be an 
integral part of Digital's transformation.  The style you will see 
from Digital management is easily summarized:  increased clarity, 
discipline, teamwork, clearer roles and responsibilities, and 
accountability.  And that accountability begins with me.

I don't expect to make excuses for my performance, and I don't 
expect to hear excuses from my management team.   Digital will have 
NO EXCUSES MANAGEMENT.  Decision-making at Digital will be driven by 
data, and I will encourage open and honest debate.  But the debate 
will also come to an end.  We will then make clear decisions.  That 
is a process I will drive personally.  Accountability also includes 
more effective communication.  For Digital employees, that means a 
commitment to candid and timely communication. 

For you, it means an opportunity to report and analyze this company 
from a base of clear and accurate information.  I am aware that 
information from Digital has sometimes come in informal, indirect 
ways, and has often been inaccurate.  I want our interaction with 
each of you to be professional, frequent, with clear lines of 
communication.  

So, in sum, Digital will be:

    o	Focused on customers needs, and listening to customer 
        requirements, 

    o	Developing new products and services to meet those customer 
        requirements;

    o	Increasing our technology leadership, and focusing on open 
        systems;

    o	Simplifying and streamlining our product set, and our 
        organization;

    o	Downsizing intelligently and with care; and finally,

    o	Building on Digital's financial strength as we return to 
        profitable growth.


Digital has some great strengths to build on and great opportunities 
to pursue.  With leadership products, a global sales and service 
infrastructure, and the creativity and dedication of our world-class 
employees, we will continue to be one of the few top players in this 
industry.

                                ####

As prepared for delivery.

Note to Editors:  Alpha AXP, OpenVMS, Digital, NAS, DECunity, 
                  DECtrade and Healthnet are trademarks of Digital 
                  Equipment Corporation.

    		  UNIX is a registered trademark of UNIX System 
                  Laboratories, Inc.

    		  Microsoft is a registered trademark of Microsoft 
                  Corporation. Windows NT is a trademark of 
                  Microsoft Corporation. 

    		  Olivetti is a registered trademark of Ing. C. 
                  Olivetti.


============================================================================
DECnews is sent as a courtesy to members of the press.
For subscription information please contact:
  David Price, USS Press Relations, Digital Equipment Corporation
  Voice:603-884-3467   FAX:603-884-3467   Internet:price@decvax.dec.com
============================================================================





%%% overflow headers %%%
Apparently-To: price@decvax.dec.com, grant, fab@vxcrna.cern.ch,
        julian@vxcrna.cern.ch, biz.dec.usenet, curtiss@umiacs.umd.edu,
        aps@berkeley.edu, sqst@research.novo.dk, coons@osf.org,
        sheroff@osf.org, diane@osf.org, nmehta@us.oracle.com,
        bbaker@oracle.com, del@intranet.com, digital-news@gcg.com,
        decnews@objy.com, se@net.com, @gateway.gtech.com:jsl@soft.gtech.com,
        gladstog@rnisd0.dnet.roche.com, edsche@eds.ericsson.se,
        vd7934@usav01.glaxo.com, clar@frese51.bitnet,
        dec_news_1@eisner.decus.org, d2b@cdfq.ssd.ray.com,
        robert_kelen@corwin.cray.com, dec-pr@cimplex.uucp, ry@ntu.ac.sg,
        tommi@solomon.technet.sg, albert@ee.su.oz.au, fbahg@nuscc.nus.sg,
        cceravi@nuscc.nus.sh, ccehewkm@nuscc.nus.sh, fbamankl@nuscc.nus.sg,
        arnold@eisner.decus.org, decnews@raleng.mtc.com, apc-open@uunet.uu.net,
        uunet!alans@uworld.com, uunet!howardb@uworld.com, releases@seiden.com,
        mjf@expert.com, rhi@rd.r.tvt.se, tst@rd.r.tvt.se,
        rtk%kirhk.dnet@radux.r.tvt.se, laurelnr@utoday.com,
        jason@cs.utexas.edu, paul@utoday.com, faden@utoday.com,
        julie@utoday.com, 76011.1155@compuserve.com, 341-9898@mcimail.com,
        mips@pcinews.lonestar.org, 75410.2343@compuserve.com,
        satnews@cix.compulink.co.uk, xeno@bgroup.chi.il.us,
        ddern@world.std.com, 548-1606@mcimail.com,
        @eddie.mit.edu:digrev!pressrelease@eddie.mit.edu,
        detwiler@detwiler.propress.com, pilla@pilla.propress.com,
        oconnell@oconnell.propress.com, pan@pan.propress.com,
        harrison@harrison.propress.com, birkhead@birkhead.propress.com,
        system@cuhhca.hhmi.columbia.edu, 4031275@mcimail.com,
        macnews@applelink.apple.com, 364-7789@mcimail.com,
        326-8704@mcimail.com, 70007.417@compuserve.com, ben@bytepb.byte.com
%%% end overflow headers %%%
Newsgroups: biz.dec