Digital Equipment Corp’s Chairman Robert Palmer is claiming that the company is on the verge of a growth streak to rival that of the late 80’s, when the company was turning in profits of $1bn on a regular basis. The source of this unbridled optimism is Digital’s fourth quarter results which show revenues up 4.5% to $3.46bn and profits up 143% to $123.9m when compared to the preceding third quarter. Gross margins have improved to the 34.6% mark, the best for three years, and Palmer feels the company is in better shape than at any time in the past 10 years. But this is a far cry from the 50% margins and 20% revenue growths seen in the late 80’s when Digital was booming, and on a year on year basis, annual revenues are actually down 10%. But the modest quarter on quarter growth rates are still a cause for optimism, with excellent performances from the personal computer business and the Windows NT, Intel and Alpha-based servers. The fly in the ointment, however, is Digital’s continuing dispute with Intel Corp, which reached new levels of unpleasantness on Wednesday as Digital accused its rival of antitrust activities in its response to Intel’s suit filed on May 27th. Digital are claiming that the Intel suit is purely an attempt to pressurize them into dropping Digital’s original suit of May 12th which claims patent infringement. The Intel suit requires the return of privileged technical information on Intel’s chips which Digital receives as a major customer, and these escalating sanctions could threaten Digital’s booming Intel-based server and personal computer business which accounts for 25% of revenue. Following the results, Digital announced plans to repurchase up to 15 million shares of the company’s common stock using some of the $2.5bn of cash reserves, which the company sees as a vote of confidence in its own future. On June 28, Digital Equipment had 153.1 million common shares outstanding.
