Lawyers and marketing people rule American IT companies and marketing is likely to determine whether or not Digital Equipment can ever return to its position of profitability and leadership in the IT industry in the next 12 months.
The future of Digital?s leader, chairman, president and CEO Bob Palmer, will also be determined as he attempts to sue Intel and reorganise Digital to bring it back into consistent profit. In recent quarters Digital has recovered but another loss last year has damaged investors? and partners? confidence in the company.
Those investors and partners are losing patience with Digital. They assert that Digital is under-performing because Alpha is superior to Pentium, its boxes are well-received and Vax offers a substantial customer base. Competitors like Hewlett-Packard, IBM and Sun Microsystems are raking in profit but Palmer has had five years to bring success back to Digital without much time in the black. The company claims its studies show it wins business as often as Hewlett-Packard and IBM when it pitches but significantly, it admits it is not considered as often as its rivals. All of this suggests that Digital?s marketing function is not delivering and Palmer admits as much.
In the past, each product group had its own sales and marketing staff but the company will complete its reorganisation on July 1, when it splits into three divisions; services, products and sales and marketing. The intention is to create an organisation with one face because channel partners and customers have complained about dealing with multiple departments at Digital. It will also centralise the heavily-criticised marketing function and ensure sales staff are well-trained and know about everything Digital has to offer, not just one product line.
In addition, sales staff have put together 100 solution sets - pre-packaged IT solutions - and are adding at the rate of three per week. They are also adopting new tactics, such as seeding Alpha-based PC workstations by offering one low-priced demo unit. The company is clearly trying to improve sales as Palmer said Digital has cut costs but now it must "increase the revenue" to induce profit.
Business operations and planning VP Charlie Bennett said: "We recognise we have a lot of work to do to turn the brand around. But we're doing things like getting customers' quotes faster to help."
Another impressive part of Digital's strategy is its key partnerships, which it calls alliances, with Computer Associates in enterprise management, Concert (the name of the merged BT and MCI telco) in Intranet computing, Microsoft in enterprise computing and Oracle in network appliances and databases. Few vendors have close relationships with so many leaders in these particularly important fields.
Behind its moves is "1-3-9", Digital's idea to use one mission and three platforms - NT, 64-bit Unix and the Internet - to win business in nine target markets - data warehousing, high performance installations, enterprise applications, visual computing, NT integration, mail/messaging, Intranet provision, Internet commerce and Internet service providers.
The company's PC business, responsible for last year?s loss because it spent a fortune price-protecting excess channel inventory, can now keep tabs on distributor sell-through. Palmer claimed: "The PC business is having the best quarter it has had. It [the lawsuit] has had no material impact on our business" That situation may change if Digital is forced to buy Pentium chips from distributors or switch all manufacturing to AMD but the PC business has always learned the hard way by making mistakes, such as entering the retail market too late and pulling out within weeks for financial reasons. Digital is in the PC business because it wants to offer a complete solution, not for raw profit.
Networking is the odd business out in Digital?s portfolio and it could be sold. The company claims networking is at the core of IT so Digital should offer products in the area but it is unlikely to effectively compete with the large networking innovators.
The services business, the $6 billion part of the company that is more profitable than any other, has been keeping the company from losses on a par with other fallen giants like Apple Computer. It is doing well - the only criticism admitted by its staff is that it needs to be more visible to help promote the Digital brand.
NT will play a large part of Digital?s future as it is the only mid-range vendor to throw its weight fully behind the OS. If corporates believe that NT scales and is reliable, Digital could capitalise. Despite its public backing of Unix, insiders suggest Digital is only pushing Unix into a small set of customers who need very large installations, in the same way it still sells its Open VMS to those who need an OS that scales and is extremely reliable. Everything else is an NT sale and a bet on Microsoft is usually a safe one.
Everything Digital has done to address its problems is impressive, all its technology and every one of its partners impress, but the bottom line doesn?t. Yet if revenue increases, all this progress made by the sales and marketing functions could be offset if Digital loses its suit against Intel, which alleges that Pentium Pro infringes Alpha?s patented technology.
Palmer admits the process will cost ?tens of millions of dollars? but his legal counsel expects to win a settlement worth billions. Palmer has been criticised for risking the future of Digital with the suit, which has certainly soured its relationship with Intel, but there is relatively little at stake.
If Digital loses, it will pay some costs from its $2.5 billion cash reserve and concentrate on products based on Alpha, Strong ARM and, where necessary, AMD processors. The PC business was making a loss anyway. If it wins, Digital could finally become a serious threat to its competition by using the money to buy rival chip or server vendors - preferably with more marketing talent.
Cotton seedling freezes to death as Chang'e-4 shuts down for the Moon's 14-day lunar night
Fortnite easily out-earns PUBG, Assassin's Creed Odyssey and Red Dead Redemption 2 in 2018
Meteor showers as a service will be visible for about 100 kilometres in all directions
Saturn's rings only formed in the past 100 million years, suggests analysis of Cassini space probe data
New findings contradict conventional belief that Saturn's rings were formed along with the planet about 4.5 billion years ago