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May 10, 1994

DEC SUFFER FROM INCORRECT PREDICTIONS

By CBR Staff Writer

Explaining the company’s painful fall from grace last quarter, Digital Equipment Corp chief executive Robert Palmer told employees that the $183m arose because for some specific products, demand actually exceeded forecasts by such an amount that we did not have sufficient ability to ship and we missed revenue opportunities, while some product areas had unacceptable levels of discounting in workstations, the company initially had a product forecast of about 15,000 units, but in January, that increased to about 19,000 and by the time the quarter closed, we had orders for 21,000 units, he said and DEC could not get the necessary materials to meet the orders and the mix of orders was not what it had expected; there was also more pricing pressure than expected on Digital Consulting and Multi-vendor Consulting Services contracts especially in the renewal and new business areas, and DEC incorrectly predicted how much customers would shift contracts to per-event consulting – acceleration of the shift put more pressure on its pricing; and 30% of the disks shipped in the quarter did not turn into revenue, but ended up in its pipeline; DEC currently does only about $150,000 per employee where its leading competitors do $300,000 per employee.

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