Oh dear, Digital. What a sorry tale it is. Just when you thought we were reaching the end of the story, another chapter unfolds. This week the company warned it would take a restructuring charge of almost half a billion pounds, lay off another 7,000 staff, and lost the head of the computer systems division Enrico Pesatori after he resigned under pressure.
Despite the turbulence of the past four years or so, chairman Robert Palmer says the current financial performance is below par. As the chief witch doctor brought in to cure Digital of its ills, he may find that shareholders insist they don't have to wait too long before his head is also on the block.
There have been unconfirmed rumours that Digital's PC division is up for sale, and it is certainly not performing to target. In fact, the PC business is widely pointed at as a real sore spot. Digital has already sold off as much as is probably feasible - Sun River, its storage business and its South Queensferry plant, though it would probably still like to offload some of its expensive real estate on to someone else.
Digital's strategy has been flawed ever since it recognised that the Vax was running out of steam and it needed a replacement strategy. It firmly nailed its colours to the NT mast well before even Microsoft was really pushing the operating system. The Alpha technology has taken longer to take off than Digital expected, and it has only now licensed the technology to other chip makers, such as Samsung. It failed to realise the potential of the PC and was too late entering the PC market. It was also too late in reducing its cost of sale from a direct sales model to an indirect sales model. And despite more than halving its workforce in the past four years, Digital's revenue per employee is still well below industry average, according to US analysts.
Some are questioning whether Digital can ever truly turn the corner and remain competitive on a global scale. It has a great deal going for it.
Its biggest revenue generating department is MCS, the consulting and services division, an area which all the big players want to increase their presence in. It has some great technology, and is warmly regarded by many of its customers. There are a lot of companies that would like a piece of what it's got.
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