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An About-Face Into Fast-Growing Field : Digital Equipment Unveils Desktop Computers

Times Staff Writer

After years of largely ignoring the personal computer market, Digital Equipment Corp. on Tuesday announced a broad lineup of desktop machines designed to give the nation’s No. 3 computer maker a share of the industry’s fastest-growing segment.

The three new lines unveiled in Boston represent a significant about-face for Digital, whose chairman and founder, Kenneth Olsen, just six months ago reportedly dismissed the powerful desktop workstation as “a tiny little machine on a desk.”

Digital, based in Maynard, Mass., has been best known for its powerful minicomputers that can serve many users at once. With its new offerings, however, the company is entering the single-user desktop markets that generated more than $50 billion in worldwide sales last year.

Desktop computers typically fall into one of two categories: personal computers made by companies such as International Business Machines and Apple Computer that commonly are found at the home or office, and more sophisticated workstations generally used by engineers and scientists.

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These markets are dominated by two of the company’s most formidable competitors--longtime nemesis IBM and a more recent workstation foe, Sun Microsystems. Once the talk of Wall Street, Digital now faces an uphill battle. In trading on the New York Stock Exchange, shares of Digital fell 50 cents to close at $98.

Analysts, however, generally were positive.

“It’s a significant announcement,” said Jeffrey Canin, a technology analyst at Hambrecht & Quist, a San Francisco brokerage. “It’s important for Digital’s future to take advantage of the general migration of users to desktop computers.”

No Resolution to Problem

Although the new products represent a major change in Digital’s strategy, analysts said they may not solve the company’s biggest recent problem: a slowdown in sales of its most profitable product, the most advanced VAX minicomputer.

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

The new products include:

- A family of sophisticated desktop workstations. At the low end is the VAXstation 3100, which will be fully compatible with the company’s line of VAX minicomputers. Prices will start at under $8,000, and shipments are expected as early as March.

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At the high end is the DECstation 3100, the company’s first machine to be based on the new, speedy reduced-instruction computer chips. Digital claims that the model, priced at $11,900, is the world’s fastest desktop workstation. Deliveries are scheduled to begin in April.

- A line of personal computers built by Tandy Corp., ranging in price from $2,630 to $4,960, which will be available this month. The personal computers will use the MS-DOS operating system and will be able to work with other MS-DOS computers, such as the popular IBM and Compaq models.

- New software, called DECwindows, which allows the new desktop models to share information with other Digital machines.

Analysts said the new products show that Digital finally has understood what business customers want: groups of small computers linked together rather than a single computer driving and supplying information to a host of terminals with no processing power of their own, the type of systems Digital traditionally has supplied.

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Outside Designs

Digital’s move also represents several significant breaks from the company’s tradition of doing things its own way. Not only did Digital introduce desktop computers made by Tandy Corp., but some of the models will use operating systems and designs, or “architectures,” developed outside the company and popularized by its primary competitors.

For example, the MS-DOS operating system in the personal computers was written by Microsoft and was first adopted by IBM. Its top-of-the line DECstation 3100 will use a version of the UNIX operating system, developed by American Telephone & Telegraph’s Bell Laboratories and popularized by Sun Microsystems. An operating system acts as a computer’s traffic cop, directing the flow of data in the machine.

Analysts said Digital’s suggested prices for the new machines show that the company is serious about making a quick dent in the desktop market. They said the company could be firing the first shot in a new round of price wars.

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“This marks the start of the desktop wars,” said UBS Securities analyst Marc Shulman in New York.

However, analyst Canin said Digital’s low prices probably mean that the company’s profit margins are slim and high-volume selling will be required for Digital to recoup its investment. If the high volumes aren’t realized, he said, the company’s profits will be squeezed.


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