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digital : Digital to Unveil Desktop Models : Effort Marks Major Shift to Personal Computers

From Reuters

Digital Equipment Corp., the company that invented the minicomputer, is now trying to convince its customers that it is just as serious about desktop computers.

The company hopes to make a big splash Tuesday with the announcement of a host of new desktop models, marking a move from expensive minicomputers to more down-market personal computers.

The effort represents a major change in attitude for one of the world’s three largest computer companies, industry analysts said. However, it may not solve Digital’s biggest problem of the past year, a slowdown in sales of its most profitable product, the most advanced VAX minicomputer.

“Back in November (chairman) Ken Olsen said the problem with sales was at the high end of the line,” said Jay Stevens, computer analyst with Dean Witter Reynolds Inc. “They are adding additional machines at the low end but that offers no resolution to the main problem.”

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With sales of the more expensive high-end machines expected to remain sluggish through the first half of this year, analysts expect Digital to report lower earnings for its fiscal year no matter how spectacular its desktop strategy.

The company’s stock has been rising over the past two months in anticipation of the much-publicized announcement of new models, which will include a family of personal computers manufactured by Tandy Corp. and a high-powered workstation based on a computer chip from MIPS Computer Inc.

But analysts caution that the announcement will not turn Digital’s outlook around immediately.

“I believe the products will be very, very aggressively priced,” said Marc Schulman, who follows Digital for UBS Securities. A combination of slim profit margins on the new models and initial limited production volumes will prevent the products from boosting Digital’s results for the next six to nine months, Schulman said.

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