Digital Equipment Corp’s last quarterly report before its acquisition by Compaq Computer Corp closes was a humdinger for shareholders even if the overall business is still shrinking. DEC reported third quarter net income up 502% at $306.82m compared with $50.96m and a net per share of $1.99. The figure includes a $201m gain from the sale of its networking business to Cabletron Systems but even without the credit net earnings of $0.65 far exceeded First Call’s $0.46 average of analysts’ estimates. Merrill Lynch & Co and other brokerages which spend their time receiving guidance from company bean counters had earlier earmarked DEC as one of the vendors likely to come in below estimates. Nevertheless DEC’s overall business continues to shrink. Revenue was down 3.6% at $3.19bn compared with $3.31bn. Revenue at the nine month mark was down 1.1% at $9.47bn compared with $9.58bn last time. Net income was $406.71m compared with $16.96m last time. DEC says product revenue – $1.68bn compared with $1.87bn last time – increased slightly (4%) once currency and the sale of its networking products are taken into account. Intel-based Windows NT server sales grew 43%, AlphaServer revenue was up 11% although total Alpha systems sales fell by 4% year over year due to a 30% decline in workstation sales. PC sales rose 13% while storage revenue grew 16% to over than $250m. Revenue from services – Compaq’s chief reason for buying DEC – was up a tad at $1.5bn compared with $1.47bn. Customers, it appears, are starting to buy from DEC specifically because it’s now got Compaq standing behind it. The acquisition has been OK’d by the European Commission, it awaits US Federal Trade Commission and shareholder approval. Rumors are rife about the fate of the staff and operations of the combined company. Some observers say Compaq will shift its server business up to DEC’s Massachusetts base and that more than 10,000 employees could be laid off.
