Digital Equipment Corp headquarters in Maynard, once fondly known as The Mill has rapidly deteriorated into The Rumour Mill over the last few weeks thanks to the overwhelming sound of silence emanating from on high. Illuminata has tried to gather the printable ones in one place for public comment. One has it that chief executive Bob Palmer and his number two Enrico Pesatori were seen tussling like schoolboys over some dispute or other, another alleged that DEC was prepared to send Palmer back to semiconductors and perhaps spin the business out together with a Japanese firm – Mitsubishi Electric Corp, its Alpha second source, maybe? – and another company. Over the weekend, there was talk of Motorola Inc buying the South Queensferry chip plant in Scotland, which would create an interesting situation, since the plant is sole world source for some versions of the Alpha RISC, which would have Motorola backing one RISC while making another; the plant is also where DEC is to make Am486 microprocessors for Advanced Micro Devices Inc, which would put Motorola into closer competition with Intel Corp than ever before.

Siemens Nixdorf

There has also been talk that DEC and Siemens Nixdorf Informationssysteme AG, which is also said to have been told it has two years to get its business back into profit, have been revisiting talks they had some two or three years ago on a possible merger. Other than that here’s a summary of and commentary on, the best DEC rumours Illuminata’s Terry Shannon and Jonathan Eunice have heard in the past week or two. At the bottom of the list are various rumours too outlandish, too implausible, or just plain too specious to warrant serious discussion. It seems highly unlikely that Ken Olsen will return to rescue DEC from its desperate plight. Or that Palmer is in fact a space alien from Altair-IV. Or that Bill Gates wants to move to Maynard. The suggestion that DEC will sell business units is almost certainly true, but which will go depends on which are seen as least strategic and on which could bring the highest prices. We’ve heard that DEC is looking for at least $5,000m cash from unit sales. Buyers are hoping, of course, for just the opposite – good stuff at low prices. Sale of StorageWorks – read Avastor – sounds like a done deal. Company executives have spoken publicly on the possibility. While StorageWorks has become a profitable business, it is not about to flood the company with cash. Indeed, its development will require significant ongoing design and manufacturing investments to stay abreast of a very competitive market. DEC can’t afford the luxury of funding such discretionary activities. On Networks and Communications, although Network World has rumoured negotiations with Bell Atlantic Corp or a similar firm, we remain somewhat sceptical given that the included technology is considered one of the firm’s core competencies. On the other hand, those in dire straits must resort to drastic measures. On Customer Services, Palmer recently indicated that downsizing in the service organisation has been modest at best, and a wholesale divestiture would not be implausible. By acquiring DEC’s service business, a General Electric Co, Electronic Data Systems Corp, or other suitor could provide sorely-needed cash and continued employment to a host of erstwhile DEC employees.

By Maureen O’Gara

Another rumour has it that DEC will split into five business units, each with its own president and sales force, under the aegis of a holding company just as John Akers wanted to do with IBM Corp and Scott McNealy has done with Sun Microsystems Inc. As Palmer told us last month, trying to disaggregate DEC from a big mushball is extraordinarily difficult. The company clearly needs its managers, from the bottom to the top, to take responsibility for their own success or failure. Then there’s the suggestion that DEC will dramatically reduce its software portfolio. Negotiations are under way for the sale of Rdb and DEC is looking for foster homes for the lion’s share of its applications software. If you happen

to own that grey coffee mug emblazoned DEC is a Software Company, you now have a collector’s item. DEC’s ambitions to become a holistic software purveyor began melting away with the dissolution of David Stone’s New Software Group and the recent departure of groupware vice-president Dennis Roberson. Those ambitions will vanish completely as DEC finds other willing buyers. As for Rdb, it could go even though DEC raked in an estimated $120m in Rdb sales last year and even though it expects to do even better this year. Neither DEC’s new-found affection for Oracle nor its reliance on Oracle technology for its forthcoming Unix database cluster bode well for Rdb’s continued tenure. Then there is the buzz that MCI Communications Inc will take a 15% equity position. The buying of DEC’s Greater Boston network represents a screen for a larger operation. Alhough DEC had $1,250m in cash in the bank as of April 15, it will need over $1,000m to cover the costs of downsizing. A strategic investment by a friendly partner would be quite handy. For its part, MCI, among many other firms, could use a technology partner for the coming multimedia superhighway. On the other hand, Palmer has been described as a control freak who would only consider surrendering a significant portion of DEC if put on a rack and tortured. It is widely reported that DEC’s sales force will be drastically cut and that as many as 1,200 salespeople will be cashiered by the end of the fiscal year. Ultimately, DEC will service only its top 550 accounts via the direct sales model. Each DEC business unit will be assigned a New Business Development Manager whose task is find new customers.

Windows NT

The details may differ, but these general outlines are likely. DEC must turn to indirect sales channels as margins tighten. It has been sending clear messages regarding its intentions to rely heavily on channel partners, but it remains far behind its peers in implementing such a strategy. Then there is gossip that DEC will replace OpenVMS with Windows NT, but that would amount to killing the company. The continued allegiance of the OpenVMS installed base is an absolute prerequisite to the firm’s continued status as a first-tier vendor. Second, it will be several years before the Windows NT applications portfolio reaches critical mass, especially as independent software vendors convert their wares to AXP after iAPX-86 and soon, after PowerPC. It is also likely to be some years before most commercial customers will fully bet their businesses on NT as they do on VMS. The other areas of gossip centre on just how big the job cuts plan will be, and how much longer Robert Palmer has to show results before the board demands he fall on his sword. Word is he has 12 months more, but must show profits by the end of the fiscal year that has just started.