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January 15, 1987

RECESSION – WHAT RECESSION? AS DEC PROFITS SOAR 98%

By CBR Staff Writer

Data processing budgets may be being pared, new projects put on ice, IBM shares may be plumbing new depths, but if so, whatever business there is must all be going to Digital Equipment Corp, which has just reported net profits for its fiscal second quarter up 98% on sales up 22% (see Company Results). And comparisons are not exactly with a bombed-out period – this time last year the company reported net up a modest 24% on turnover up 14% for its fiscal 1986 second quarter. Breaking the figures down, DEC says that outright sales rose 16% but service and other revenues rose 36%, while its pre-tax operation margin soared towards IBM’s traditional levels, 18.7% from 9.9% a year ago. DEC hired 3,000 new employees during its fiscal second quarter, taking its worldwide workforce to 101,000, and significantly, the company saw particularly strong sales of medium and large VAXes, while the financial services and telecommunications sectors were the fastest-growing. The truth behind the figures is of course that the recession is not as bad as IBM makes it out to be, that many of IBM’s problems are peculiar to itself, and that customers in some of the fastest-growing sectors are increasingly turning to DEC rather than IBM for solutions.The figures rocketed DEC’s share price $11.625 to $130 and it was up another $3.50 by noon yesterday.

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