Digital Wrestles With Sagging Sales

DIGITAL Equipment Corporation is a bellwether of Route 128 and, like much of the region, it's in trouble.Digital, based in Maynard, Mass., has been rocked by the departure of several key executives in recent weeks. The company is in the midst of restructuring. Morale is low, employees say, and wasn't helped by the news that chairman Kenneth Olsen unloaded $5.8 million worth of his Digital stock Aug. 1. Company spokesmen are quick to point out that the sale represents only about 2 percent of Mr. Olsen's holdings. And, they say, the same forces affecting Digital - namely sagging sales - have hit the rest of the computer industry, too. But the forces of change are magnified at Digital. Once a shining star among the world's high-tech companies, the company rode the minicomputer boom in the 1970s and early 1980s to become the second-largest computer manufacturer after IBM in the United States. Working for Digital carried a certain cachet among high-tech executives in Route 128. Now, it elicits sympathy, says the marketing director of a local computer company. Newer technology from rivals and the industry's move from proprietary systems, such as Digital's, to a more open computer architecture, have caused sales to sag. The company has resorted to layoffs for the first time in its history. From a peak of some 72,000, the number of Digital employees in the US has fallen to 62,000. Digital isn't about to disappear, analysts say. "They're financially very solid," says Robert Herwick, managing director of technology research at Hambrecht & Quist. The immediate challenges are to rev up the price-performance of Digital's bread-and-butter VAX-VMS line and keep cutting the work force, he adds. On Oct. 30, the company plans to announce some major improvements to its VAX line. The long-term problem, Mr. Herwick says, is that Digital's next generation of products won't appear until 1993 or 1994, leaving it vulnerable to competitors for the next two or three years.