Digital Equipment's chief executive Robert Palmer crossed his shareholders again on Friday when he opposed their latest suggestions.
At the annual shareholders' meeting, where Palmer had outlined his latest turnaround strategy, the attendees had called for board directors to be elected every year rather than every three. They had also wanted a shareholder rights plan or poison pill scheme, adopted in 1989 to make takeover of Digital less attractive, to be scrapped. The votes are advisory only, so Palmer is likely to ignore them.
But shareholders showed some confidence in Palmer - who has been besieged by criticisms and even calls to resign from some factions this year - by voting against a proposal that he should give up either his president's or chairman's post. Palmer said it is common in the IT industry for one figure to be president, chairman and CEO, as he is.
He claimed the company is "back on track" after at least five years of restructuring and financial hiccups. The cornerstones of his strategy for growth, he told the meeting, are a single worldwide sales and marketing organisation, which he started to build earlier this year; a single products division selling the whole Digital range and avoiding internal competition; and the settlement of the lawsuit with Intel over Alpha chip technology, which was announced last month.
He said Digital is on target to raise its net margins to seven per cent by the end of next year, and added that the Intel deal was a factor in that move. Net margins were one per cent last year and are about three per cent currently. Analysts believe that, without the Intel settlement, they would only have scraped five per cent in 1999.
Palmer added that analyst estimates of revenue growth of 4-5 per cent for the fiscal year are "reasonable" - revenue was $13 billion last fiscal.
"I am confident that this is the year that Digital will begin to grow again," said Palmer, looking forward to the Internet being the "computing platform of choice" and setting out the primary corporate aim of being "the most trusted provider of Internet-based solutions for the enterprise."
These can be marketed and sold more aggressively by the single global organisation, he claimed, and build on traditional Digital strengths in high performance computing and networking.
But he believes services will be the primary driver of growth in the year ahead. "Today, customers spend 47 per cent of their IT budgets on services and industry projections indicate that spending will be closer to 60 per cent by the year 2000," he said.
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