DEC earnings improve in 3Q over 2Q but fall 59% from '96

Electronic News, April 21, 1997

Some attribute the drop to a lag in computer sales and the continued slow pace of Alpha microprocessor design-ins.

Product revenue in the quarter was $1.84 billion compared to $2.06 billion in the last 3Q. Service revenue was $1.48 billion compared with $1.57 billion reported in the same period last year.

Digital chairman Robert B. Palmer tried to put a positive spin on Digital's lackluster performance: "Although revenue was not where we wanted it to be, it was within our expectations with progressin key strategic areas. I am particularly encouraged by the growth in Windows NT-based solutions and Internet products and services. I am confident that we will return to year-over-year revenue growth over the next few quarters." He added that Digital is winning business with Microsoft Exchange on Windows NT, capturing approximately 900,000 Exchange seats worldwide since the beginning of the fiscal year.

Total operating revenue for the quarter was $3.31 billion, compared to $3.62 billion reported for the comparable quarter a year ago. Gross margin for the quarter was 33.4 percent, compared with 32.9 percent in the previous quarter and 34.6 percent for the comparable period a year ago. Product gross margin was 35.3 percent, compared with 37.1 percent in 3Q96. Service gross margin was 31 percent compared with 31.3 percent in 3Q96.

Total operating expenses were $1.06 billion compared to $1.13 billion reported in the same period last year. The company ended the quarter with $2.48 billion in cash and short-term investments, up approximately $200 million from the 2Q. During the quarter, the company repurchased 4.5 million shares for about $160 million. Digital completed the quarter with about 55,100 employees--"a net reduction of 5,800 positions from a year ago," according to the company.