Digital is going to change, declared Robert Palmer in his inaugural address on taking over the helm at Digital Equipment Corp from Ken Olsen at the end of last week. It’s time for a clear direction with a focus on meeting our customers’ needs. Palmer promised that every aspect of DEC’s operations would be re-thought to meet the demands of the most competitive environment it has ever faced – it has not shown an operating profit in three quarters and lost $2,800m last fiscal. It will take time to bring about all the changes that are necessary, but we will begin today, he said – starting with further big cuts in the workforce, currently 113,000. Some 10,000 have gone since the company started trimming a couple of years ago, and Palmer did not dispute analysts’ projections that reductions may total at least 15,000 more within a year. My forecast in general terms, is that the rate of departure of employees will increase – increase rather significantly, he said. He also said that his immediate task was to ensure the return of this enterprise to profitable growth. He has asked managers worldwide to calculate a potential for cost cutting and asset elimination, and their numbers were in the vicinity of $800m to $1,000m in recurring costs and something on a similar magnitude in assets taken out without any loss in productivity. The company will now focus on services, software, networking, semiconductors and storage, he declared, and will re-allocate its $1,800m engineering investment away from hardware to make products that customers say they want.

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Our practice of empowering engineering groups to design their own unique solutions for some segment of the marketplace has often resulted in product overlap and redundancy, he said. We will eliminate redundancy and simplify our product set. And making clear that he means it, he intended to name a vice-president of engineering to rationalise our hardware and software investments. DEC will also work more closely with its strategic partners, like Microsoft Corp and Ing C Olivetti & Co SpA, in which it is now a minority shareholder, and will stop trying to do everything for everybody all the time, everywhere. He confirmed that DEC’s sales staff will start being paid commission for the first time, probably in January. Perhaps the best news, although many will wonder whether it will turn out that way, is that he does not believe additional restructuring charges will be necessary.I believe that the restructuring that we did was appropriate to the magnitude of the challenge that we are facing, he said – the company took a $1,500m restructuring charge in the fiscal fourth quarter. He also said that changes in upper management would be unavoidable, and that it would seek talent from outside the company. He also paid trubute to the company’s founder, saying Nobody can replace Ken Olsen, he said. Ken Olsen is a legend in the computer industry and rightly so. I don’t know of any individual who had more impact on the computer industry than Ken. What we need is a little bit of leadership at my level to make it clear to the entrepreneurs in our company what the objectives are, and a little more willingness on the part of our senior management to listen to our customers and give them what they are asking for.