News Analysis: Revamp puts wind into Digital?s sales

Sales and marketing has been the company?s weak point, but all that looks set to change

Lawyers and marketing people rule US IT companies and marketing is likely to determine whether Digital can ever return to its position of profitability and leadership in the IT industry in the next 12 months.

The future of Digital 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.

Palmer has had five years to bring success back to Digital without much time in the black. The company claims it wins business as often as Hewlett Packard and IBM when it pitches, but it is not considered as often as its rivals. All of this suggests its 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 1 July, splitting into three divisions: services, products, and sales and marketing. In doing so it will 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 a week. They are also adopting new tactics, such as seeding Alpha-based PC workstations by offering one low-priced demo unit.

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 to help, like getting customer quotes faster.?

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.? But that may change if Digital is forced to buy Pentium chips from distributors or switch all manufacturing to AMD.

Networking is the odd business out in Digital?s portfolio and it could be sold.

The services business, the $6 billion part of the company that is more profitable than any other, has been keeping Digital from losses on a par with other fallen giants like Apple. 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 in 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 on this.

Everything Digital has done to address its problems is impressive. But all the progress made by the sales and marketing functions could be offset if it loses its suit against Intel, in which it alleges that the 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.