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Articles about DEC
Volume 2, Number 11 November 1983
Ken Tells Shareholders About Short-Term Problems And Long-Term Strengths
Questions And Answers
VT200s -- Winning In The Video Game
Bill Helm Elected Treasurer
Ed Kramer Given Responsibility For Pc Marketing And Sales
Corporate Marketing Planning And Finance
Kevin Sullivan Assumes New Position
Employee Sales Referral Program Being Developed
Speaking to a standing-room-only audience of shareholders at Digital's annual meeting, Ken Olsen, president, explained the company's lower-than- expected first quarter results and emphasized the company's long-term strengths in products and people,,
As is usual, the formal part of the meeting took only a few minutes. It was followed by Ken's presentation and then questions from the audience. The meeting provided a supportive forum for Ken to talk about Digital's position. The questions were varied in nature, and Ken conveyed his confidence in Digital's long-term success and its ability to overcome current problems.
"Our personal computers have been received well, and we shipped 19,000 of them last quarter. However, this number was well below what we had planned. Also, a few of our newest and highest technology products had some unusual start up problems, and this delayed shipments of our largest systems," said Ken.
"We're In the business of making change," he noted. "We have dramatic changes every year with our products. The products we made a few years ago now look used, antique and strange. The products we'll have a few years from now will make the ones we're so proud of today look strange and antique.
"We sell products which become less and less expensive and we sell larger and larger numbers of them. This means continuous change in our organization and continuous change in our administrative procedures. This last quarter we simply changed too many things at one time." As it turned out, administrative difficulties masked and compounded other problems.
He added that despite this situation, the
order rate is going up, and the backlog is increasing. "Our
office sales, in particular, have done very well this last
year. That's partly because of the power of the VAX but
largely due to the DECmate. We sold about 600 licenses to our
office package that we call All-in-1. The average All-in-1
sale — the hardware and the software license — is about
$300,000. We see this market continuing to grow.
"We are a fast growing and significant factor in the office market and, as far as I know, we have not lost an office bid to the biggest word processing company in any new account. This is because our offering with the DECmate and the VAX is so strong."
"When we made administrative changes this last quarter," explained Ken. "We did not fully appreciate the important contribution of large numbers of people who, through the years, were able to work with these complexities and keep control of them. We are now slowly, carefully — without introducing new problems — setting about to correct this. We think we understand the problems, and we think we know how to take care of them.
"As it turned out, we got way behind in acknowledging customer orders. We had trouble putting the orders together; and the tally we had during the quarter wasn't correct. So we didn't know we were in trouble until well after the quarter was over.
"The beauty of this kind of problem is that it is relatively easy to fix, and in the key parts of the company, which include personnel and products, we're stronger than ever. I'm more enthusiastic about the company than I ever have been in the past and more proud of our organization and our products," Ken emphasized.
Discussing the personal computer market, he observed that personal computers are an offshoot of the minicomputers that Digital introduced 26 years ago. "We have always made computers that are inexpensive and small enough and fast enough that individuals can interact with them. A personal computer is simply a specialized minicomputer. In fact, our Professional computer and our latest minicomputer use exactly the same set of processor chips. The technology is the same, and, as a subset of our normal range of products, personal computers are a key part of our overall strategy."
"We were somewhat late in getting into this market. We aim for computers which are more rugged, with more industrial quality, and better designed to suit the way people work. Our personal computers are designed well enough for someone to use them comfortably for six, eight, ten, even twelve hours a day.
"This last year, there were delays in getting some of our software -— some we generated and others were generated by outsiders. Now those delays are behind us, and people are beginning to recognize the importance of our quality designs."
Strength in products
Ken pointed out that Digital's most successful products — the PDP-11 family of 16-bit minicomputers, VT100 video terminals and the VAX family of 32-bit super-minicomputers — were all initially criticized as being "late."
"For several years, we were lambasted by the press for not having a 16-bit computer. But we worked at it until we had a design we thought could last foreer. The machine we inroduced in 1970 was more expensive and more complicated than the competition, but it had all the features that we wanted, and it became a standard in the industry. And now, after thirteen years, one of the most recent additions to that family -- the MICRO/PDP-11 -- is the hottest selling item in our stable. We have increased production at least five times in the last four months, and people can't get them fast enough. That's because they are small, inexpensive and fast; with all the qualities we designed into the family and all the software that has been developed for it over the years.
"When we introduced the VT100, it looked like the world did not need another video terminal. Tehre were many other terminals already on the markeet. The prices were low. It was a very competitive market. We designed a terminal that had all the features thata we, as users of terminals, thought were necessary. Our price was high compared to the competition, and it didn't look like people would want to pay extra for the added features. But people slowly elarned about those features, and our share of the business grew. Soon the VT100 became the indsutry standard.
"It's probably the most copied piece of electronics in the history of man. The world is now full of them, because we insisted on not making the lowest price but making the highest quality."
Digital will soon announce the replacement for the VT100 — the VT200 family (see related story). It has the same size picture the VT100 features plus new features, but in a far expect it, too, to become the standard," he boasted.
"The VAX story sounds like the others," he went on. "When we designed the first member of the VAX family, it looked like there was no room in the market for anotoher 32-bit computer. That, of course, challenged us to amke one that was good enough to last. We built enough addressing space into it to last for a long time. We built all the features, all the conveniences, all the safety factors, all the checks we could think of. When we came out with it, it very quickly became the standard of the industry. In CAD/CAM work, industrial control, factory control, and many education applications, it is the standard computer. Our biggest competitor openly admits that they are trying hard to make a computer to match the VAX."
He pointed out two new VAX computers tht were on display for the shareholders -- MicroVAX I and the VAX-11/725. "The MicroVAX fits in a very small box. It is so compact that it will open up entirely new applications. And soon, with that, yhou will be able to make a personal computer with much of the power of a full-size VAX. Another version of the MicroVAX, which will be even smaller and faster, is also in the works."
The VAX-11/725, a machine announced just a few weeks ago, is a VAx-11/730 repackaged in a neater, smaller box, with a very quiet fan. The appearance, the smallness and the quietness make it particularly appropriate for the office.
"Every fiscal year we add features to our large VAX machines. This year we plan to add even more, and late in the fiscal year we are going to come out with a long waited for, much larger, many-times-faster VAX. It's coming along very well."
With regard to networks, Ken noted, "Digital has always been the leader in interconnecting computers. We have interconnected large numbers of our computers, often with those of other vendors, into networks that are complex and efficient."
Pointing to a cable overhead, he demonstrated the simplicity and elegance of Ethernet. "You simply run this cable all through the building or buildings you want to interconnect, and wherever you want to hook up a computer, you just clamp that black box transceiver on the cable and run a wire down to your computer. The Ethernet cable can be more than a mile long and can be tapped into over a thousand times.
"We can tie any number of large VAX systems on Ethernet to communicate with each other and anyone else. In addition, we can connect VAXs together in clusters. Clustering provides the ability to tie a number of VAXs together with a number of disk files to share load, to gain speed, to gain redundancy for approaching fault-free computing and to protect, duplicate and optimize disk storage."
"As this world of computing narrows and as competition gets stronger and smarter, it's important that we increase the productivity of our individuals and organizations," Ken concluded. "It's important that we make changes. It's important that we take chances, and we're enthusiastic about this opportunity.
"The business is more fun than ever, more exciting than ever, and we look forward to the coming years with much more enthusiasm than any time in history."
The following is a sampling of shareholder questions and Ken's answers.
Could you elaborate on the administrative problems? And how long will it take to fix them?
"Administrative procedures are not normally the sort of thing that gets raised to the top level. They are left to the group that is responsible for them. Now, one group making a mistake isn't bad, and they learn right away. In this case, several groups made mistakes at the same time.
I'm not out looking for blame or to get anyone who made
mistakes. We are systematically fixing the problems. I think
it's a matter of months and hopefully we can take care of all
the customers while we are doing it. However, when you get
behind in administrative things like this, it. does take some
Have you made any decisions about what to do about expense levels?
"With poor first quarter results, we will be thorough and energetic about cutting back on expenses. Whereas other large companies in similar situations have had large layoffs, we need our people. Our strengths are in our products and our employees."
Why is the high performance VAX late?
"In R&D, we always stretch beyond what is easy. For our high end VAX, we set out to be technological leaders. That meant that we had to learn. We made a number of false starts, and some people who set out in the same period of time to make simpler machines with off-the-shelf technology finished their designs faster. But we have no apologies for wht we're doing here.
"In the past, when we designed a computer, we were always dependent on having one very smart person who could undeerstand the whole machine. This machine got to the point of complexity wehre no single person could understand it. More organization was needed to develop it.
Also, in the past, we were dependent on building a prototype machine fairly early and then trouble shooting it a piece at a time, mechanically. With large nubmers of complex integrated ciruits, that approach was impossible with this machine.
:So, well along in the project, we decided to change our approach. We installed walll-to-wall VAXs and some DECsystem-10/20s to simulate each piece of the new computer. For months, running those machines 24 hours a day, we simulated every single piece of that machine and made corrections before one was built. So when the prototype, with that delay, was put together, there were almost no mistakes in it. For what we're learning there, it is well worth the delay, because it's a technique we'll use in every machine and eventually even in our small machines. We're proud of it."
Is the business becoming more competitive?
"During the years of recession, things have been more competitive. Now IBM is aiming directly at us, formally copying our procedures and techniques and the way we've done some things technically. They're embarassed by our success. So, yes, from that point of view it will be competitive.
"That's going to be part of the technical
challenge we have in products, in selling, marketing and
organizing, but we'll match our technology against anybody. So
we look forward to the contest."
Announced earlier this month, the VT200 video terminals are small, quiet, light-weight successors to the extremely successful VT100 family. With all the same features, plus some new ones, VT200s sell for about 30 to 40 percent less than their counterpart VTlOOs.
The new features improve ease-of-use and provide capabilities that will benefit programmers, and OEMs in particular. For instance, character sets can be downline loaded from a computer to the terminal. In other words, a terminal could be quickly converted into a pharmacy inventory system or some other specialized system, with symbols unique to that application loaded from a remote host. Also, special function keys carry out tasks that otherwise would take whole sequences of individual keystrokes. For instance, the user could log onto a system to get Dow Jones information or to use electronic mail by pushing a single key.
There are three models. The VT220 sells for $1295. It has the same keyboard as Digital's personal computers, and a wedge-shaped monitor, slightly larger than the personal computer monitor to accommodate the logic for the terminal.
Selling for $2195, the VT240 has all the text capabilities of the VT220 plus monochrome graphics similar to the VT125 (which sells for $3800). Both the monitor and the keyboard are the same as those of the PC. The logic is contained in a separate small box.
The VT241, the color version, with the 13-inch PC color monitor, sells for $3195. (To get color with a VT100 requires two separate monitors at a cost of more than $5000.)
The VT220 was engineered and is being built in Taiwan, with close links between Engineering and Manufacturing. The 240 and 241 are being built in Albuquerque.
"We are going to have product on the shelf and be ready to ship orders the day we announce — Nov. 15," says Art Campbell, manager, Terminals Product Group. "During the balance of the fiscal year we'll be able to deliver as many VT200 products as VT100 products. We have about equivalent manufacturing capacity in both lines. That's about six months ahead of where we traditionally are with new product announcements."
Bill Helm has been elected Treasurer by the Board of Directors. He replaces George Chamberlain, who has been named vice president of Engineering Finance .
Bill joined Digital six years ago and has held various positions in the Treasury Department. He spent the last two-and-a-half years as the F&A manager in Europe.
Ed Kramer, vice president, Corporate Marketing, has been given full responsibility for marketing and selling Digital's full line of personal computers. He will coordinate all activities in this area, and will elevate and respond to related policy decisions.
Rainbows and DECmates will continue to be sold through the channels, but Professionals will be limited to direct customer sales, except when specifically requested by dealers. Responsibility has been given to Bill Long for the establishment of direct sales to the educational, scientific and medical markets.
A1 Crawford, who was recently named Corporate Marketing Finance and Planning manager, has created a support organization staffed by Ken Swanton and Jim Bailey.
Ken, who will manage the Corporate Planning and Market Analysis department, will be responsible for the development and implementation of processes that will improve communications about and management of Digital's market businesses. This includes strategic/LRP and market segment reporting,,
Jim, who will be in charge of Corporate Pricing & Competitive Analysis, will be responsible for adding more in-depth analysis to strategic pricing decisions throughout the product life cycle. He will also develop data bases and simple processes to serve all functions in Digital relative to gathering information about the competition, analyzing it and assuring the results are readily available when needed.
Kevin Sullivan has been appointed U.S. Field Personnel manager, reporting to Dick Walsh, Field Operations Personnel manager. He will be responsible for the delivery of personnel services for the Field organization in the United States.
Kevin has been with Digital for the past eight years, and most recently was Corporate Compensation manager. Prior to that, he was the European Personnel manager for Digital.
A sales referral program is being developed to give employees the information they need to help friends and colleagues purchase Digital's personal computers. The referral program is being designed to dovetail with the Employee Personal Computer Purchase Program and the Learning Center activities in the company. The total effort is intended to help employees understand and enjoy using our personal computers so they are comfortable talking to other people about the capabilities of this equipment.
"If employees are turned on by using our personal computers, they will become a natural salespeople," explains John Alexanderson, manager of the Installed Base Group and the person responsible for developing the comprehensive referral program.
"We want to be certain that all potential issues about the referral program are clearly resolved before we implement anything. Past frustrations employees have encounterd with order and referral requests are being taken into consideration so that we come up with the best possible system," notes John. He adds that the program will be announced within the month and, in order to succeed, it needs the full support of managers and supervisors.
Learning Centers have been set up in 21 sites to give employees the opportunity for hands-on experience with the personal computers. It is Digital's intention to expand use of these centers in order to help as many employees as possible to become computer-literate and comfortable with the equipment.