Digital Equipment Corp’s heavy guidance did the trick, and its third quarter profits of $0.74 a share were exactly in line with Wall Street’s revised expectations of $0.74 – they had been looking for $1 a share until the company warned that the personal computer business was in trouble again. Third quarter profits rose 68% over the same period last year at $124m, its biggest third-quarter profit in six years. Turnover for the quarter was $3,620m, up 4% on last year. Underlining what a small proportion of total business Alpha systems still represent, a 60% growth in sales of Alpha servers translated into a mere 5% increase in equipment sales to $2,100m; storage was up 50% too, but DEC only integrates the disk subsystems now, where it once made the disks. Service business grew 4% to $1,600m. Ironically, the weakness in desperately low-margin personal computers meant that overall margins improved and were better than expected. The company said overall gross margins for the quarter were 34.6%, up from 32.2% a year earlier, but within that, product gross margins were 37.1%, up from 32.5% in the second quarter and 28.7% in the year-ago third quarter, but service gross margins fell to 31.3% from 32.7% in the second quarter and 36.7% in the year-ago third quarter. Revenues from its personal computer business were lower than expected during the quarter, but it did not disclose the actual figures. It blamed the personal computer woes on an industry slowdown in the commercial market sector, competitive pricing pressure, and higher levels of inventory in distribution channels. The company is taking steps to respond to this situation and expects improved performance in the June quarter, said Vincent Mullarkey, vice-president and chief financial officer. DEC had 60,900 employees at the end of the quarter, a net reduction of 2,200 from a year ago, and 200 since the turn of the year. The personal computer business was hurt more than we thought, SoundView Financial Corp analyst Gary Helmig told Reuter. Total operating expenses were $1,107m against with $1,029m in the same period last year; DEC’s cash position is now improving fast: the third quarter reflected the highest cash flow from operations in five years and the company ended the quarter with $1,738m in cash.