Digital Equipment Corp’s fiscal first quarter figures show just the glimmer of a start of a turnaround, with the erosion of turnover stemmed. But the pre-tax loss before accounting changes was even worse than a year ago at $190.7m compared with $099.7m. The company says that revenues from its Alpha AXP systems and from personal computers nearly doubled in the fiscal first quarter, but gross margins were way down on those for a year ago, at 30.2%, compared with 36.1% a year ago. But the 30.2% figure compared with 29.9% in the previous quarter, the fourth quarter of fiscal 1994. The loss of 98 cents a share was better than Wall Street had expected, with the consensus averaging out at $1.38 a share. Doubling of Alpha AXP revenue may sound impressive, but the machines still account for only 19% of product revenue, which came to $1,650m in the quarter, up 6.4% on the year-ago figure. Even personal computers, a newly bolted-on activity for DEC, did better, accounting for 22% of product sales, and selling mountains of personal computers is never going to keep the company in the style to which it used to be accustomed. Service revenues were up marginally, at $1,470m from $1,450m. Operations achieved order rate growth in all major geographies, including strong growth in Asia-Pacific operations and moderate growth in the US and Europe. The head-count was reduced by only about 5%, or 4,000, in the quarter, to 73,800 regular staffers. While we are not satisfied with any loss, the current quarter’s results contain many encouraging signs that give us confidence in our current plan to move the company toward its objective of sustained profitability, chief executive Robert Palmer said somewhat optimistically. Sales, general and administrative expenses fell to $836m in the quarter from $872m a year ago. Research and development spending fell 9% to $288m. The company ended the quarter with $881m in cash, which means that it got through $300m in the quarter. Cash usage associated with restructuring activities in the quarter was $235m and covered actions that took place in the fourth quarter of fiscal 1994 and in the current quarter. In the quarter, 57% of product revenue was generated through indirect channels, up from 41% last time.
