Digital Posts Fourth-Quarter Loss
Jul. 30, 1996
MAYNARD, Mass. (AP) _ Digital Equipment Corp., after diminishing investor expectations and announcing a restructuring earlier this month, lived up to its word Tuesday by reporting a loss of $433 million for its fiscal fourth quarter.
The company squeaked out a $59 million profit from operations but then took a $492 million charge for the restructuring, which will eliminate 7,000 jobs.
Digital employed 59,100 at the end of the quarter, down 1,800 from the end of March and down 2,600 from the end of June 1995.
Digital had been hurt by missteps in personal computers as those products are becoming more important to its overall performance. PC revenue was down slightly in the quarter but executives said the PC business would be growing and profitable again within six months.
The loss amounted to $2.87 per common share. A year ago, Digital earned $160 million, or $1.01 per share, in the same period.
Revenue was $3.72 billion, down slightly from $3.75 billion a year ago.
Without the charge, Digital would have earned 33 cents per share. Analysts expected a 36-cent-per-share profit, according to a survey by Zack's Investment Service.
Digital's stock closed up 62 1/2 cents to $36.12 1/2 Tuesday on the New York Stock Exchange.
Like other computer companies, Digital said European sales growth was down due to economic conditions and dragged on overall performance.
Product revenue was $2.141 billion, compared with $2.132 billion a year ago. The company's gross margin on products was 34.3 percent for the quarter, up 3.1 percentage points from a year ago.
Services revenue was down slightly at $1.578 billion, compared with $1.618 billion. Gross margin on services was 30.4 percent, down from 34 percent a year ago. Executives said the margin had stabilized and should improve in the next few quarters.
``We still have a good deal of work to do in a number of areas, but I am confident that the foundation is there for a stronger and more profitable Digital in fiscal 1997,'' Digital chairman Robert Palmer said in a statement.
Vincent Mullarkey, the company's chief financial officer, said Digital ended the fiscal year with the highest cash level in nearly five years _ $2 billion, up 27 percent from a year ago.
The computer maker also announced a stock repurchase program for up to 10 million common shares, which would be used to fund employee stock plans.
For its 1996 fiscal year, Digital lost $112 million, or 97 cents per common share. Without the fourth quarter restructuring, Digital earned $380 million, or $2.23 per share. It earned $122 million, or 59 cents a share, in fiscal 1995.
Revenue was $14.6 billion, up 5 percent from $13.8 billion last year.