Digital to take a charge of $1.2 billion

July 15, 1994|By New York Times News Service

MAYNARD, Mass. -- Digital Equipment Corp. announced yesterday that it would take a $1.2 billion charge for the fourth quarter to cover the elimination of 20,000 jobs and the reduction of 10 million square feet of office and manufacturing space.

The company, which had announced the job reductions earlier, said the cuts would be accelerated and take place over 12 months rather than two years, as had been previously announced.

Robert Palmer, Digital's president and chief executive, also announced the end of the company's longtime approach to management.

"Matrix management at our company is dead," Mr. Palmer said in a conference call with reporters.

Digital's matrix management structure, which became the focus business school case studies and organizational management books, was an often chaotic and frustrating environment, where decisions were debated endlessly across departments and business units.

It fostered internal competition and resulted in many ground-breaking computer systems like the PDP and VAX lines. The approach, created by Digital's founder, Kenneth Olsen, fueled tremendous growth in the 1960s to the mid-1980s.

But Mr. Palmer said such a strategy no longer worked. "That management approach may have been right when Digital was an emerging company, but it has proved to be unaffordable in the marketplace of the 1990s," he said.

Mr. Palmer announced the formation of two new divisions: the computer systems division, to be run by Enrico Pesatori; and the components division, under Charles Christ.

An advanced technology group under the company's chief technical officer, William Strecker, was also established. Three other units -- multivendor customer services, Digital consulting and semiconductor operations -- will be established.

Shares of Digital fell $1.25 yesterday, to $20.125 per share, on the New York Stock Exchange.

When the job cuts are completed, the company will have a work force of 65,000 people.

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