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Digital Unveils New RISC Workstation, Aggressive Pricing

April 4, 1990

PALO ALTO, Calif. (AP) _ Digital Equipment Corp. launched an assault on the computer industry’s hottest market, introducing its most powerful workstations, slashing prices on other models and vowing to take the lead in ″open″ systems.

Digital showed off over 20 new computers, peripherals and software products Tuesday, including a 3D desktop workstation it claimed is the industry’s highest performing model.

The Maynard, Mass.-based company is playing catchup in RISC-based workstations and systems based on non-proprietary, ″open″ operating software, but it took a feisty stand in the first major product announcement at its Silicon Valley facility.

In addition to price cuts on its entire family of RISC-based workstations - the cheapest is now $5,950 - along with servers and ULTRIX software, the company said it has improved discounts and will offer finder’s fees for third- party sales.

″All of this reinforces our primary message,″ said Donald Gaubatz, Digital’s group manager for workstations. ″We intend to be number one in the open systems market, and we are doing what it takes to achieve that goal.″

Wall Street apparently liked what it heard and sent Digital’s recently depressed shares up $2.50 to $79.62. The price was over $100 last fall.

Sales of workstations - powerful desktop computers - are expected to grow 35 percent this year to $8.1 billion, according to San Jose-based Dataquest Inc.

Leading companies like Sun Microsystems Inc., Hewlett-Packard Co., Digital, and big newcomer International Business Machines Corp. have been bringing out new models and cutting prices relative to performance.

That’s good news for the businesses, banks and engineering companies that are the main buyers of workstations.

″This market is going to be hotly competitive for a very long time,″ said Barry Willman, an analyst with New York-based Sanford C. Bernstein & Co., who attended Digital’s introduction.

″The companies are prepared to aggressively defend the installed base they’ve already developed and are aggressively focused on building that base,″ he said, adding that Digital appears to be embarking on a price war.

″Given how aggressively Digital was comparing themselves to H-P, Sun and IBM, I would expect those other vendors not to be silent in the face of that attack,″ he said.

Digital’s pursuit of market share comes at a time when it also needs to bolster profits. Analysts predict the company’s revenues for the fiscal year ending June 30 will barely exceed last year’s $12.7 billion, and earnings will drop for the second year in a row - this time by 70 percent.

The new products, most of which are ready for shipment, aren’t expected to have an impact on revenues until the 1991 fiscal year. The company has been cutting overhead with a severance program aimed at reducing its 126,000 employees by 8,000.

Until last year Digital was ambivalent about its commitment to open industry standards such as American Telephone & Telegraph Co.’s Unix software and RISC, or reduced instruction set computers.

Now, the company says that segment of its business will soon match its VAX workstations and proprietary VMS software lines.

Domenic LaCava, Digital’s vice president for low end systems, said the company expects ″incremental″ growth in its VAX workstation business and that ″over time the ratio of RISC workstations to VAX workstations will level out.″

″Over this next year we should see something approaching 50-50,″ he said. ″The RISC line is starting to take off dramatically. We have seen the order rate double and triple in weekly orders over the last three or four months.″

Computer hardware analyst Kevin Landis of Dataquest was impressed but not overwhelmed by the capabilities of Digital’s new 5000 series workstations, which start at $14,995.

″It doesn’t cleanly leapfrog everybody but it’s good,″ said Landis. ″It’s a significant step for them to go to open systems and step away from their traditional line. They’re making a lot of tough choices. It represents a strategic leap for them.″

Willman said the new computers, peripherals and software ″significantly broaden their product line from a performance standpoint and also significantly improve their price competitiveness in the market.″

Digital cites research by International Data Corp., in Framingham, Mass., that shows Digital is only slightly behind workstation market leader Sun Microsystems and ahead of Hewlett-Packard, which recently bought Apollo Computer Inc.

Dataquest’s Kathleen Hurley says Digital holds just under 20 percent of the market and is third behind Hewlett-Packard.

In any event, all of the big three workstation leaders have to contend with a potentially invasive rival -IBM.

IBM last month brought out a line of workstations it said would snare a major share of a market in which it never had success.

The machines, called the RISC System-6000, represented the first time IBM has wholeheartedly embraced the Unix operating system.

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