Digital Equipment Corp met its internal target of returning to profit for the calendar fourth quarter of 1994, surprising analysts by turning in a net figure of $18.9m or $0.07 a share for its fiscal second quarter – most analysts were expecting the compan to report a loss, with the mean estimate being a loss of 30 cents a share. Turnover for the quarter also rose, by 7% to $3,470m. The company said the big improvement was largely down to its energetic cost-cutting programmes over the past two years in response to the slump in demand for its VAX minicomputers: it has cut its workforce by 25% over the past 12 months, leaving it with 65,000 employees – and 8,200 went last quarter alone. How did it grow with so many fewer people? It did 58% of its business through resellers last quarter, up from only 43% a year ago. As a result of the stringent cost-cutting measures, total operating expenses declined 10% in the quarter to $1,110m, and the company ended the quarter with $1,130m in cash. Sales of Alpha RISC-based systems were up by over 150% on the year-ago period: orders grew strongly and product revenues rose 13% to $1,870m. Geographically, growth was strong in Asia while the European operations, where cost-cutting measures are facing stiff resistance, made excellent progress in restructuring the company said, and the European business is now positioned for profitable growth. Service revenues were up just 0.6% at $1,600m, but the company faces an uphill struggle here as VAX sites go dark and maintenance contracts end. Service gross margins were 36.1% in the quarter, up from 35.5% in the fiscal first quarter but down from 39.2% a year ago. Overall gross margins were 33.1%, up from 30.2% in the first quarter but down from 36.1% in the second quarter last year.
