clarinews@clarinet.com (01/19/90)
MAYNARD, Mass. (UPI) -- Digital Equipment Corp., the world's second-biggest computer maker, reported a 44 percent drop in earnings for the latest quarter and a surprised Wall Street hammered the company's stock in heavy trading. Digital earned $155.4 million, or $1.25 a share, in the second quarter ended Dec. 30, compared with $$279.6 million, or $2.20 a share, in the same quarter a year earlier. Meanwhile, total revenues were virtually stagnant at $3.18 billion, up a microscopic 0.2 percent from a year earlier. For the first two quarters of the year so far, Digital reported profit of $306.2 million, or $2.44 a share, down 39 percent from the first half of the year before. The disappointing results sent Digital's stock plunging $5.875 a share to $82 on a volume of 1.9 million shares. The bad news followed by a day a report of a 75 percent drop in profit at International Business Machines, the industry leader whose poor performance had been more in line with analysts' expectations. Digital President Kenneth H. Olsen said the overall market for computers in the United States ``is still slow'', although he said prospects are good in Japan and Europe. He warned that the company expects ``continued pressure on operating results.'' ``Uncertain economic conditions are affecting customer purchasing intentions and slowing down the computer industry,'' said Olsen. The company, a maker of main frames and mini-computers, recently introduced a new line of mainframe and super computers, the Vax 9000, which has yet to show up substantially on the income side of its balance sheet. Meanwhile, Digital has largely ignored workstations, the fastest-growing segment of the computer market. Janney Montgomery of Philadelphia issued a sell order on Digital stock Thursday morning. ``The revenue numbers were, politely, very disappointing,'' explained James M. Meyer, who follows computer companies for Janney Montgomery. ``It's a very simple ballgame. You can't grow a company on revenue growth of less than 1 percent .... What's happened to DEC is what they did to IBM. They're getting considerable pressure from underneath. The minis (that Digital builds) aren't going to gain from the mainframes as fast as they're going to lose to the workstations'' of competitors, Meyer said. Meyer also speculated that layoffs likely will be necessary at Digital. ``The most surprising thing to me is that the company actually increased head count in the quarter,'' he said. ``If you're going to do that, you're going to get the kind of results they got today.''