Digital posts US$433 million quarterly loss

Digital has posted a US$433 million quarterly loss, due to restructuring charges associated with layoffs and other cost cuts.

As expected, Digital has posted a US$433 million quarterly loss, due to restructuring charges associated with layoffs and other cost cuts. The US$492 million restructuring charge dragged down Digital's earnings for the fiscal year that ended on June 29. For the year, it reported a US$112 million loss on revenues of US$14.6 billion, company officials say.

During the quarter, Digital cut 1800 positions, bringing the company down to 59,100 employees, officials say. Another 7000 layoffs are planned this coming fiscal year, leading to the restructuring charge, officials say.

The results come as no surprise, according to one analyst, since Digital broadcast its fiscal troubles earlier this month. Slow PC sales and channel glut as well as a weak European market hurt its fiscal fourth quarter revenues, leading it to seek facility consolidations and 7000 layoffs over the next 12 months.

"The infrastructure in place still wasn't as lean and mean as perhaps some of their competitors are and that's what they're addressing," says Jay Bretzmann, director of worldwide systems research at International Data, in Framingham, Massachusetts.

Digital is focused on market areas that offer strong growth, such as 64-bit computing, Bretzman says. But the company's health will hinge on how quickly those market segments grow, he says. "This is a big company, a big computer systems supplier, and it's tough when the market shifts to maintain the same revenue stream," Bretzmann says.

Excluding the restructuring charges, Digital's net income for the quarter was US$59 million, a 63% drop from the US$160 million reported during the same period last year, officials say. Revenues for the quarter were US$3.72 billion, flat with last year, officials say.

For the full year, excluding the restructuring charges, net income was US$380 million, more than a three-fold increase over last year's US$122 million. Revenues for the full year were US$14.6 billion, an increase of 5% over last year's US$13.8 billion.

During the quarter, product revenue rose to US$2.141 billion, compared to US$2.132 billion the previous year, officials say. Service revenue for the quarter dropped to US$1.578 billion, compared to US$1.618 billion the previous year.

Digital's PC business quarterly revenues slumped 3%, officials say. But its Alpha system revenues grew 34% compared to the fourth quarter last year, sparked by sales of Digital's midrange 4100 AlphaServer and its high-end 8000 AlphaServer line, officials say. Digital's Unix revenue grew 33% quarter over quarter, and its Windows NT revenue grew by more than 100%, officals say.

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