Digital says profits will continue

Summary:Digital Equipment Corp. officials have high hopes for the next few quarters, predicting that the company will continue to boost sales and profits.

Digital Equipment Corp. officials have high hopes for the next few quarters, predicting that the company will continue to boost sales and profits. Despite this, a general malaise in the market saw the stock at $49.38, down from $50.94 when trading began.

Chief Financial Officer Vin Mullarkey said second-quarter earnings should be "significantly" higher than the 11 cents per share profit the company reported for its first fiscal quarter.

He would not comment specifically on analysts' predictions for the upcoming quarter -- which average around 62 cents per share -- but said the company was "providing guidance of improved growth and improved margins. We're also projecting continued balance sheet strengthening. The consensus at 60-odd cents reflects that."

Digital's results for this first quarter -- the fourth straight positive quarter for the company -- squeaked past expectations.

Total sales grew $50 million to $2.96 billion, while net income rose to $25 million, or 11 cents per share, above the First Call estimate of 10 cents. A year ago, the Maynard, Mass., company lost $66 million, or 48 cents per share.

Digital saw a drop in service revenues of about $11 million to $1.4 billion. But product revenues rose 4 percent to $1.6 billion, helped by strong sales in the storage business and network products business.

Of particular interest to investors have been sales of Digital's flagship Alpha processor, which saw an overall 4 percent growth. While sales of Alpha-based client products fell compared to the same quarter last year, Alpha-based server products grew 17 percent, with Unix systems sales increasing 18 percent.

Digital's Intel Corp. processor based systems also saw growth, including client-side products, which had higher sales for the first time in five quarters. Total Intel server sales were up 70 percent, and sales of Intel servers running Windows NT jumped 140 percent from the same period last year.

Bruce Claflin, senior vice president and general manager of worldwide sales and marketing, said that the company has not had any problems with supply or support for Intel processors, despite an ongoing patent dispute with Intel.

He declined to discuss the suit, or a recent rumor that Digital planned to sell its Alpha business to Intel; instead, he reiterated the company's commitment to the platform.

Here's what Digital's top executives had to say about the company's earnings report.

Topics: Intel

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