Digital Equipment pleased analysts with a 134 per cent leap in second quarter earnings, with the UK the brightest spot in Europe.
The company was marginally ahead of Wall Street estimates with earnings of $74.8 million, up from $31.9 million last year, on operating revenues of $3.324 billion, down one per cent on $3.358 billion last year because of currency fluctuations.
Digital?s performance in the UK was a key contributor to profits growth, according to UK and Ireland marketing director Martin Brophy. ?Digital?s growth in the UK was the strongest in Europe, particularly in the products sector, where sales of our Alpha technology, Intel-based servers and storage technology were very strong indeed. As far as we are concerned business is booming,? he said.
?Taking into account the weakened condition of the Asian economy and the overall negative impact of currency, Digital recorded a solid quarter,? said chairman Robert Palmer. ?In constant currency, Digital?s revenue grew six per cent over the previous year.?
A spokesperson for Digital said that a longer sales cycle, a decline in sales in Asia - where Digital gets about 20 per cent of its revenue - and volatile currency rates curbed what could have been stronger revenue gains. Sales should grow in the third and fourth quarter as the Asian financial markets stabilise, the company said.
To assist further growth, the company is looking to develop its strategic businesses with an emphasis on networked business solutions, according to Palmer. It recently announced a contract with online information provider Reuters to provide NT servers at centres across the world, and a deal with the Nasdaq stock exchange to design and implement services and software for the Nasdaq Enterprise Wide Network II.
The emphasis on NT was reflected in the results, with NT revenue up a massive 94 per cent over the comparable period last year, while Digital?s Unix Alphaserver revenues crept up by only five per cent.
Brophy hinted that more acquisitions in the services sector were planned in the near future as Digital builds on its core businesses. ?We have a strong balance sheet with lots of cash. From a strategic point of view we have a very strong product line so any acquisitions will focus on strengthening the software and services side,? he added.
Digital is also looking for future gains from its partnership with Cabletron Systems, which has acquired the Digital Network Products Business. The two companies have established reseller and services contracts that Digital claims will provide both customers of both with a full range of network products.
?This agreement marks the completion of the plan initiated several years ago to divest of non-core businesses,? Palmer said.
Earnings per common share for the quarter ended 27 December were $0.44, up from $0.15 last year. Wall Street was expecting earnings of $0.43 per share.
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