DEC's Olsen bowing out; taps Palmer

Electronic News, July 20, 1992 by Peter Dunn

MAYNARD, MASS.--Last week's surprise retirement announcement by Digital Equipment Corp. patriarch Kenneth H. Olsen marks the transition from VAX to the new flagship architecture, Alpha, developed under the auspices of Robert B. Palmer, Mr. Olsen's designated successor.

The 66-year-old Mr. Olsen, who will leave as of Oct. 1, informed the company board of his decision last Thursday. He will retain his seat on the board of directors; his term expires in November, 1993. DEC declined comment on whether any other changes in management might be forthcoming.

Mr. Olsen's decision to leave day-to-day work at the company he founded in 1957 came just one day after he presided over a major introduction of new VAX computers, and sent shock waves through DEC employees and observers. Opinionated, didactic and engineering-driven, Mr. Olsen has achieved as much as almost any entrepreneur in U.S. history. There was an increasing perception, however, that directors of the company wanted a change at the top to address the company's string of quarterly losses and redeploy resources for future growth.

Despite DEC's strong position in mid-range systems, the company was slow to respond to the 1980s trend toward desktop computers, open software architectures and RISC technology. And although Mr. Olsen was one of the first to realize the power of networking, DEC has been a non-starter in the drive to extend the paradigm to laptop and handheld systems and potential mobile communications synergies. The forthcoming arrival of the 64-bit Alpha microprocessor, developed under Mr. Palmer, may augur a new business orientation toward markets outside traditional computers, where profits and growth have been scarce.

Mr. Palmer, 51, is vice president of manufacturing, logistics and component engineering, and a seven-year veteran of DEC. Most of his experience is in the company's semiconductor manufacturing operations. He was one of a group who left Texas Instruments to found Mostek Corp., where he was active in manufacturing process development, and was involved in the formation and early management of Sematech, although he turned down Sematech's presidency in 1988.

Mr. Olsen's recommendation for Mr. Palmer to head DEC as president and CEO, which must still be approved by the board, indicates an increased emphasis on silicon technology and possibly board-level businesses. DEC seems to have staked much of its future on the Alpha, and potentially more aggressive merchant market efforts may be in the offing.

The selection brings to an end many years of speculation as to who would succeed Mr. Olsen. While Mr. Olsen had said as recently as last fall that he had no plans to step down (EN, Nov. 11, 1991), DEC watchers had seen senior vice president of operations Jack Smith, global information systems vice president Frank McCabe, and vice president of mass storage systems Charles Christ among the potential candidates. In addition, the computer industry is riddled with former DEC executives who had been considered heirs apparent: Jack Shields, now president of Prime Computer; former chief financial officer James Osterhoff, who left last fall; and sales executives David Grainger and Richard Nortz who left shortly thereafter.

In addition, Pier Carlo Falotti resigned as president of DEC's European operations to join The ASK Companies, Mountain View, Calif., as CEO, succeeding Sandra L. Kurtzig, ASK chairman and founder. It is unclear whether this was related to the top-level changes at DEC, although Mr. Falotti also has been mentioned as a potential heir. Mr. Smith, to whom Mr. Falotti had reported, assumed his duties on an interim basis.

Former DEC vice president Donald McInniss, vice president and general manager of Prime Computer's CADDS business group, spoke for many in the extended DEC family when he said "It's quite shocking that Ken would resign at this point. Most people didn't expect it; it's certainly the passing of an era."

Calling Mr. Palmer "very polished and knowledgeable," and pointing to his experience in IC production, Mr. McInnis noted "Semiconductors have been an increasing part of the hardware business. In the '70s, there was very little DEC-manufactured content. Now there's the potential for desktop machines based on the Alpha. DEC, Hewlett-Packard and IBM have all used their semiconductor assets to their advantage and gained market share; HP has done a good job with the PA-RISC and I think DEC is trying to move Alpha that way."

C. Scott Kulicke, chairman and CEO of Kulicke & Soffa Industries, served on the original Sematech board of directors with Mr. Palmer, and called him "one of the pre-eminent semiconductor guys in the country." In Sematech's early days, he recalled, "This guy sort of came out of left field, but commanded tremendous respect." DEC, he added, is one of the companies that has received the most out of the consortium's efforts.

Chris Christiansen, an International Data Corp. analyst, called Mr. Olsen's departure "a necessary event," and predicted an 18- to 24-month transition period. "Alpha is a long way from delivering profitability, and management changes will take months," he said. "The adjustment to life without Ken will be tough for the employees."