Digital Equipment Corporation
Digital Equipment Corporation, also known as Digital, was a major employer in Galway from the 1970s to the 1990s.
How It Began For Us:
In June 1973, just the day before we were to begin to sit our Leaving Certificate, a few of us were contacted by the late Fr. Patrick Costello of Holy Rosary College, Mountbellew, through a complex form of a primitive messaging system of word of mouth and telephone as it was back then, to be at Scarry’s Cross at 1.00pm and he would take us into the Digital factory at Mervue Industrial Estate for a meeting with the Personnel Manager, Mike Mulqueen, with a view to us gaining employment in the computer industry and also with the opportunity of further education and qualifications to various levels of technical and electronic competence – all supplied and paid for by the company. It was a unique deal at that time which, of course, as young people, we did not appreciate or comprehend.
Duly, at 1.00pm the Holy Rosary School mini bus, a VW model – registration number HIM 606, arrived at Scarry’s Cross with Fr. Costello at the wheel and we were all brought in to this very important interview/meeting. First we were shown around the factory and then we proceeded to one of the internal classrooms where we were given an application form each to fill out. Next, Mike Mulqueen gave us a talk on the company and its future plans, etc and told us we could all start work on Monday morning and would receive the weekly wage of £17.00 rising to £19.00 after three months – a very generous weekly wage at the time for anyone leaving secondary school. Further we would attend electronic classes and would train to be qualified electronic technicians which would increase our wages to £26.00 per week.
At this stage Fr Costello intervened and explained that we were all about to sit Leaving Certificate the next day to which Mike replied “They won’t need that in here, we’ll look after them”. But after discussion Fr. Costello got his way and we were all set to begin work on the Monday following the end of the Leaving Certificate Examination. The rest is history and we joined the many other local people who were working there and, indeed, many more local people followed us into the industry in the years after our starting date.
What Was Digital Equipment Corporation:
Digital Equipment Corporation, also known as DEC and using the trademark Digital, was a major American company in the computer industry from the 1960s to the 1990s. It was a leading vendor of computer systems, including computers, software, and peripherals, and its PDP and successor VAX products were the most successful of all minicomputers in terms of sales. From 1957 until 1992 its headquarters were located in a former wool mill in Maynard, Massachusetts, since renamed Clock Tower Place and now home to multiple companies. DEC was acquired in June 1998 by Compaq, which subsequently merged with Hewlett-Packard in May 2002. Some parts of DEC, notably the compiler business and the Hudson, Massachusetts facility, were sold to Intel. Digital Equipment Corporation should not be confused with the unrelated companies Digital Research, Inc or Western Digital, although the latter manufactured the LSI-11 chipsets used in DEC’s low end PDP-11/03 computers. Initially focusing on the small end of the computer market allowed DEC to grow without its potential competitors making serious efforts to compete with them. Their PDP series of machines became popular in the 1960s, especially the PDP-8, widely considered to be the first successful minicomputer. Looking to simplify and update their line, DEC replaced most of their smaller machines with the PDP-11 in 1970, eventually selling over 600,000 units and cementing DECs position in the industry. Originally designed as a follow-on to the PDP-11, DEC’s VAX-11 series was the first widely used 32-bit minicomputer, sometimes referred to as “superminis”. These were able to compete in many roles with larger mainframe computers, such as the IBM System/370. The VAX was a best-seller, with over 400,000 sold, and its sales through the 1980s propelled the company into the second largest in the industry. At its peak, DEC was the second largest employer in Massachusetts, second only to the state government.
The rapid rise of the business microcomputer in the late 1980s, and especially the introduction of powerful 32-bit systems in the 1990s, quickly eroded the value of DEC’s systems. DEC’s last major attempt to find a space in the rapidly changing market was the DEC Alpha 64-bit RISC processor architecture. DEC initially started work on Alpha as a way to re-implement their VAX series, but also employed it in a range of high-performance workstations. Although the Alpha processor family met both of these goals, and, for most of its lifetime, was the fastest processor family on the market, extremely high asking prices were outsold by lower priced x86 chips from Intel and clones such as AMD. The company was acquired in June 1998 by Compaq, in what was at that time the largest merger in the history of the computer industry. At the time, Compaq was focused on the enterprise market and had recently purchased several other large vendors. DEC was a major player overseas where Compaq had less presence. However, Compaq had little idea what to do with its acquisitions, and soon found itself in financial difficulty of its own. The company subsequently merged with Hewlett-Packard in May 2002. As of 2007 some of DEC’s product lines were still produced under the HP name.
History and Origins:
DEC was headquartered at a former wool mill at Clock Tower Place, Maynard MA from 1957 until 1992. Ken Olsen and Harlan Anderson were two engineers who had been working at MIT Lincoln Laboratory on the lab’s various computer projects. The Lab is best known for their work on what would today be known as “interactivity”, and their machines were among the first where operators had direct control over programs running in real time. These had started in 1944 with the famed Whirlwind which was originally developed to make a flight simulator for the US Navy, although this was never completed. Instead, this effort evolved into the SAGE system for the US Air Force, which used large screens and light guns to allow operators to interact with radar data stored in the computer. When the Air Force project wound down, the Lab turned their attention to an effort to build a version of the Whirlwind using transistors in place of vacuum tubes. In order to test their new circuitry, they first built a small 18-bit machine known as TX-0 which first ran in 1956. When the TX-0 successfully proved the basic concepts, attention turned to a much larger system, the 36-bit TX-2 with a then-enormous 64 kWords of core memory. Core was so expensive that parts of TX-0’s memory were stripped for the TX-2, and what remained of the TX-0 was then given to MIT on permanent loan. At MIT, Olsen and Anderson noticed something odd: students would line up for hours to get a turn to use the stripped-down TX-0, while largely ignoring a faster IBM machine that was also available. The two decided that the draw of interactive computing was so strong that they felt there was a market for a small machine dedicated to this role, essentially a commercialized TX-0. They could sell this to users where graphical output or realtime operation would be more important than outright performance. Additionally, as the machine would cost much less than the larger systems then available, it would also be able to serve users that needed a lower-cost solution dedicated to a specific task, where a larger 36-bit machine would not be needed.
In 1957 when the pair and Ken’s brother Stan went looking for capital, they found that the American business community was hostile to investing in computer companies. Many smaller computer companies had come and gone in the 1950s, wiped out when new technical developments rendered their platforms obsolete, and even large companies like RCA and General Electric were failing to make a profit in the market. The only serious expression of interest came from Georges Doriot and his American Research and Development Corporation (AR&D). Worried that a new computer company would find it difficult to arrange further financing, Doriot suggested the fledgling company change its business plan to focus less on computers, and even change their name from “Digital Computer Corporation”. The pair returned with an updated business plan that outlined two phases for the company’s development. They would start by selling computer modules as stand-alone devices that could be purchased separately and wired together to produce a number of different digital systems for lab use. Then, if these “digital modules” were able to build a self-sustaining business, the company would be free to use them to develop a complete computer in their Phase II. The newly christened “Digital Equipment Corporation” received $70,000 from AR&D for a 70% share of the company, and began operations in a Civil War era textile mill in Maynard, Massachusetts, where plenty of inexpensive manufacturing space was available.
Faltering in the market:
As microprocessors continued to improve in the 1980s, it soon became clear that the next generation would offer performance and features equal to the best of DECs low-end minicomputer lineup. Worse, the Berkeley RISC and Stanford MIPS designs were aiming to introduce 32-bit designs that would outperform the fastest members of the VAX family, DEC’s cash cow. Constrained by the huge success of their VAX/VMS products, which followed the proprietary model, the company was very late to respond to these threats. In the early 1990s, DEC found its sales faltering and its first layoffs followed. The company that created the minicomputer, a dominant networking technology, and arguably the first computers for personal use, had abandoned the “low end” market, whose dominance with the PDP-8 had built the company in a previous generation. Decisions about what to do about this threat led to infighting within the company that seriously delayed their responses. One group suggested that every possible development in the industry be poured into the construction of a new VAX family that would leapfrog the performance of the existing machines. This would limit the market erosion in the top-end segment, where profit margins were maximized and DEC could continue to survive as a minicomputer vendor. This line of thought led, eventually, to the VAX 9000 series, which were plagued with problems when they were first introduced in October 1989, already two years late. The problems took so long to work out, and the prices of the systems were so high, that DEC was never able to make the line the success they hoped. Others within the company felt that the proper response was to introduce their own RISC designs and use those to build new machines. However, there was little official support for these efforts, and no less than four separate small projects ran in parallel at various labs around the US. Eventually these were gathered into the DEC PRISM project, which delivered a credible 32-bit design with some unique features allowing it to serve as the basis of a new VAX implementation. Infighting with teams dedicated to DEC’s big iron made funding difficult, and the design was not finalized until April 1988, and then cancelled shortly thereafter. Another group concluded that new workstations like those from Sun Microsystems and Silicon Graphics would take away a large part of DEC’s existing customer base before the new VAX systems could address the issues, and that the company needed its own Unix workstation as soon as possible. Fed up with slow progress on both the RISC and VAX fronts, a group in Palo Alto started a skunkworks project to introduce their own systems. Selecting the MIPS processor, which was widely available, introducing the new DECstation series with the model 3100 on 11 January 1989. These systems would see some success in the market, but were later displaced by similar models running the Alpha.
32-bit MIPS and 64-bit Alpha Systems:
Eventually, in 1992, DEC launched the DECchip 21064 processor, the first implementation of their Alpha instruction set architecture, initially named Alpha AXP (the “AXP” was a “non-acronym” and was later dropped). This was a 64-bit RISC architecture (as opposed to the 32-bit CISC architecture used in the VAX) and one of the first “pure” (not an extension of an earlier 32-bit architecture) 64-bit microprocessor architectures and implementations. The Alpha offered class-leading performance at its launch, and subsequent variants continued to do so into the 2000s. An AlphaServer SC45 supercomputer was still ranked No. 6 in the world in November 2004. Alpha-based computers (the DEC AXP series, later the AlphaStation and AlphaServer series) superseded both the VAX and MIPS architecture in DEC’s product lines, and could run OpenVMS, DEC OSF/1 AXP (later, Digital Unix or Tru64 UNIX) and Microsoft’s then-new operating system, Windows NT. In 1998, following the takeover by Compaq Computers, a decision was made that Microsoft would no longer support and develop Windows NT for the Alpha series computers, a decision that was seen as the beginning of the end for the Alpha series computers.
The Final Years:
At its peak in the late 1980s, Digital had $14 billion in sales and ranked among the most profitable companies in the USA. With its strong staff of engineers, Digital was expected to usher in the age of personal computers, but the autocratic and trend-resistant Mr. Olsen was openly skeptical of the desktop machines, saying “the personal computer will fall flat on its face in business”, and regarding them as “toys” used for playing video games. Digital’s fortunes declined after missing out on some critical market shifts, particularly toward the personal computer. The board forced Olsen to resign as president in July 1992. In June 1992, Ken Olsen was replaced by Robert Palmer as the company’s president. Digital’s board of directors also granted Palmer the title of chief executive officer (“CEO”), a title that had never been used during Digital’s 35-year existence. Palmer had joined DEC in 1985 to run Semiconductor Engineering and Manufacturing. His relentless campaign to be CEO, and success with the Alpha microprocessor family, made him a candidate to succeed Olsen. At the same time a more modern logo was designed. Palmer restructured Digital into nine business units that reported directly to him. Nonetheless, Digital continued to suffer record losses in recent quarters, including a loss of $260.5 million for the quarter that ended on September 30, 1992. It reported $2.8 billion in losses for its fiscal year 1992. January 5, 1993 saw the retirement of John F. Smith as senior vice president of operations, the second in command at Digital, and his position was not filled. A 35-year company veteran, he had joined Digital in 1958 as the company’s 12th employee, passing up a chance to work for Bell Laboratories in New Jersey to work for Digital, then a tiny start-up company in the mill town of Maynard, Mass. Smith rose to become one of the three senior vice presidents in 1987 and was widely considered among the potential successors to Ken Olsen, especially when Smith was appointed chief operating officer in 1991. Smith became a corporate spokesman on financial issues, and had filled in at trouble spots for which Olsen ordered more attention. However Smith was passed over in favor of Palmer when Olsen was forced to resign in July 1992, though Smith stayed on for a time to help turn around the struggling company. In June 1993, Palmer and several of his top lieutenants presented their reorganization plans to applause from the board of directors, and several weeks later Digital reported its first profitable quarter in several years. However on April 15, 1994, Digital reported a loss of $183 million—three to four times higher than the loss many people on Wall Street had predicted (compared with a loss of $30 million in the comparable period a year earlier), causing the stock price on the NYSE to plunge $5.875 to $23, a 20 percent drop. The losses at that point totaled $339 million for the current fiscal year. Sales of the VAX, long the company’s biggest moneymaker, continued to decline, which in turn also hurt Digital’s lucrative service and maintenance business (that made up more than a third of Digital Equipment’s revenue of $14 billion in the 1993 fiscal year), which declined 11 percent year over year to $1.5 billion in the most recent quarter. Market’s acceptance of Digital Alpha computers and chips has been slower than the company had hoped, even though Alpha’s sales for the quarter estimated at $275 million were up significantly from $165 million in the December quarter. Digital also made a strong push into personal computers and workstations, which had even lower margins than Alpha computers and chips. Also, Digital was playing catchup with its own Unix offerings for client-server networks, as it long emphasized its own VMS software, while corporate computer users based their client-server networks on the industry-standard Unix software (of which Hewlett Packard was one of the market leaders). Digital’s problems were similar to that of larger rival I.B.M., due to the fundamental shift in the computer industry that made it unlikely that Digital could ever again operate profitably at its former size of 120,000 employees, and while its workforce had been reduced to 92,000 people many analysts expected that they would have to cut another 20,000. During the profitable years up until the early 1990s, DEC was a company that boasted that it never had a general layoff. Following the 1992 economic downturn, layoffs became regular events as the company continually downsized to try to stay afloat. Palmer was tasked with the goal of bringing DEC back to profitability, which he attempted to do by changing the established DEC business culture, hiring new executives from outside the company, and selling off various non-core business units:
Worldwide training was spun off to form an independent/new company called Global Knowledge Network.
Rdb, DEC’s database product, was sold to Oracle.
Rights to the PDP-11 line and several PDP-11 operating systems were sold to Mentec in 1994, though DEC continued to produce some PDP-11 hardware for a few years.
Disk and DLT technologies was sold to Quantum Corporation in 1994.
Text terminal business (VT100 and its successors) was sold in August 1995 to Boundless Technologies.
CORBA-based product, ObjectBroker, and its messaging software, MessageQ, were sold to BEA Systems, Inc in March 1997.
In May 1997, DEC sued Intel for allegedly infringing on its Alpha patents in designing the original Pentium, Pentium Pro, and Pentium II chips. As part of a settlement, much of DEC’s chip design and fabrication business was sold to Intel. This included DEC’s StrongARM implementation of the ARM computer architecture, which Intel marketed as the XScale processors commonly used in Pocket PCs. The core of Digital Semiconductor, the Alpha microprocessor group, remained with DEC, while the associated office buildings went to Intel as part of the Hudson, Mass. fabrication site.
Printer business was sold in 1997 to GENICOM (now TallyGenicom), which then produced models bearing the Digital logo.
Networking business was sold c.1997 to Cabletron Systems, and subsequently spun off as Digital Network Products Group.
DECtalk and DECvoice voice products were spun off, and eventually arrived at Fonix Speech Group.
By 1997, Digital had subsidiary companies in more than two dozen countries including Austria, Australia, Belgium, Brazil, Canada, China (People’s Republic), Colombia, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Ireland, Israel, Japan, Jersey States, New Zealand, Netherlands, Norway, Russia, Singapore, Spain, Sweden, Switzerland, Taiwan, and the United Kingdom.
Eventually, on 26 January 1998, what remained of the company (including Digital’s multivendor global services organization and customer support centers) was sold to PC manufacturer Compaq in what was the largest merger up to that time in the computer industry. Several years earlier, Compaq had considered a bid for Digital but became seriously interested only after Digital’s major divestments and refocusing on the Internet in 1997. At the time of Compaq’s acquisition announcement, Digital had a total of 53,500 employees, down from a peak of 130,000 in the 1980s, but it still employed about 65 percent more people than Compaq to produce about half the volume of sales revenues. After the merger closed, Compaq moved aggressively to reduce Digital’s high selling, general, and administrative (SG&A) costs (equal to 24 percent of total 1997 revenues) and bring them more in line with Compaq’s SG&A expense ratio of 12 percent of revenues. Compaq used the acquisition to move into enterprise services and compete with IBM, and by 2001 services made up over 20% of Compaq’s revenues, largely due to the Digital employees inherited from the merger. Digital’s own PC manufacturing was discontinued after the merger closed. As Compaq did not wish to compete with one of its key partner suppliers, the remainder of Digital Semiconductor (the Alpha microprocessor group) was sold to Intel, which placed those employees back in their Hudson (Massachusetts) office, which they had vacated when the site was sold to Intel in 1997. Compaq struggled as a result of the merger with Digital, and was acquired by Hewlett-Packard in 2002. Compaq, and later HP, continued to sell many of the former Digital products but re-branded with their own logos. For example, HP now sells what were formerly Digital’s StorageWorks disk/tape products, as a result of the Compaq acquisition.
The Digital logo survived for a while after the company ceased to exist, as the logo of Digital GlobalSoft, an IT services company in India (which was a 51 percent subsidiary of Compaq). Digital GlobalSoft was later renamed “HP GlobalSoft” (also known as the “HP Global Delivery India Center” or HP GDIC), and no longer uses the Digital logo. The digital.com and DEC.com domain names are now owned by Hewlett-Packard and redirect to their US website. Digital once held the Class A IP address block 188.8.131.52/8.
The Digital Federal Credit Union (DCU, now DFCU), which was chartered in 1979 for employees of DEC, is now open to essentially everyone. DFCU has over 700 different sponsors, including the companies that acquired pieces of DEC.