Digital Equipment Corp got one half of the equation right with its third quarter figures, showing net profit of 44 cents a share, right at the top of Wall Street estimates and way ahead of the consensus figure of 28 cents for the quarter. But the other half of the equation still looks sunk in the mire – turnover was up a mere 6.4%, and given the withering of the dollar and the fact that DEC does well over half its business outside the US these days, 6.4% looks as if it can all be accounted for and more by the decline in the dollar over the past 12 months. That means that all the profit is being squeezed out of cost-cutting – the company cut operating expenses to $1,029m from $1,272m a year ago, and the jury will remain out on the company’s future until it starts to show real growth again: 6.4% is hardly impressive when competitors like Sun Microsystems Inc grew at 28% in the same period. The company says the third quarter profits were driven by strong demand for its Alpha workstations and servers, and growth in its personal computer products. On the dollar, DEC says that the weakness in some countries created a slightly positive impact on revenues in the quarter, but non-dollar denominated expenses offset the impact. Gross margins continue to fall, hitting 32.2% of turnover last quarter, compared with 33.8% a year ago. The company completed the quarter with some 63,100 employees, a reduction of 22,600 jobs, or 26%, against the same period last year. Cash at $1,460m was up 16% from a year ago. Product revenues were up 12% in the quarter at $1,961m, the fourth consecutive quarter of product revenue growth, but the supposed white hope, service revenues, were about flat, down a smidgen at $1,506m compared with $1,509m a year ago. The company says it shipped its 100,000th Alpha system, with total Alpha revenues surpassing $3,000m since the line was introduced. Alpha revenues were up 66% on the same period last year. Product gross margins fell to 28.7% of turnover, down from 30.5% of turnover in the second quarter, because of a change in product mix.
