Origins (1944–1958) Ken Olsen and
Harlan Anderson were two engineers who had been working at
MIT Lincoln Laboratory 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,
Ken Olsen and
Harlan 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 the graphical output or real-time 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. 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 its Phase II. The newly christened "Digital Equipment Corporation" received $70,000 from AR&D for a 70% share of the company, and the company began operations in a
Civil War-era
textile mill in
Maynard, Massachusetts, where plenty of inexpensive manufacturing space was available.
Digital modules (1958) In early 1958, DEC shipped its first products, the "Digital Laboratory Module" line. The Modules consisted of a number of individual electronic components and
germanium transistors mounted to a
circuit board, the actual circuits being based on those from the TX-2. The Laboratory Modules were packaged in an extruded aluminum housing, intended to sit on an engineer's workbench, although a
rack-mount bay was sold that held nine laboratory modules. They were then connected together using
banana plug patch cords inserted at the front of the modules. Three versions were offered, running at 5 MHz (1957), 500 kHz (1959), or 10 MHz (1960). The
PDP-1 and
LINC computers were also built using System Modules (see below). Modules were part of DEC's product line into the 1970s, although they went through several evolutions during this time as technology changed. The same circuits were then packaged as the first "R" (red) series "
Flip-Chip" modules. Later, other Flip-Chip module series provided additional speed, much higher logic density, and industrial I/O capabilities. The first PDP-1 was delivered to
Bolt, Beranek and Newman in November 1960, and formally accepted the next April. The PDP-1 sold in basic form for $120,000 (). By the time production ended in 1969, 53 PDP-1s had been delivered. The PDP-1 was supplied standard with 4096 words of
core memory,
18-bits per word, and ran at a basic speed of 100,000 operations per second. It was constructed using many System Building Blocks that were packaged into several
19-inch racks. The racks were themselves packaged into a single large mainframe case, with a hexagonal control panel containing switches and lights mounted to lie at table-top height at one end of the mainframe. Above the control panel was the system's standard
input/output solution, a
punched tape reader and writer. Most systems were purchased with two
peripherals, the Type 30
vector graphics display, and a
Soroban Engineering modified
IBM Model B Electric typewriter that was used as a
printer. The Soroban system was notoriously unreliable, and often replaced with a modified
Friden Flexowriter, which also contained its own punched tape system. A variety of more-expensive add-ons followed, including
magnetic tape systems,
punched card readers and punches, and faster punched tape and printer systems. When DEC introduced the PDP-1, they also mentioned larger machines at 24, 30 and 36 bits, based on the same design. During construction of the prototype PDP-1, some design work was carried out on a 24-bit PDP-2, and the 36-bit PDP-3. Although the PDP-2 never proceeded beyond the initial design, the PDP-3 found some interest and was designed in full. Only one PDP-3 appears to have been built, in 1960, by the CIA's Scientific Engineering Institute (SEI) in
Waltham, Massachusetts. According to the limited information available, they used it to process radar cross section data for the
Lockheed A-12 reconnaissance aircraft.
Gordon Bell remembered that it was being used in
Oregon some time later, but could not recall who was using it. In November 1962, DEC introduced the $65,000
PDP-4. The PDP-4 was similar to the PDP-1 and used a similar instruction set, but used slower memory and different packaging to lower the price. Like the PDP-1, about 54 PDP-4s were eventually sold, most to a customer base similar to the original PDP-1. In 1964, DEC introduced its new
Flip-Chip module design, and used it to re-implement the PDP-4 as the
PDP-7. The PDP-7 was introduced in December 1964, and about 120 were eventually produced. An upgrade to the Flip Chip led to the R series, which in turn led to the PDP-7A in 1965. The PDP-7 is most famous as the machine for which the
Unix operating system was originally written. Unix ran only on DEC systems until the
Interdata 8/32. A more dramatic upgrade to the PDP-1 series was introduced in August 1966, the
PDP-9. The PDP-9 was instruction-compatible with the PDP-4 and −7, but ran about twice as fast as the −7 and was intended to be used in larger deployments. At only $19,900 in 1968, the PDP-9 was a big seller, eventually selling 445 machines, more than all of the earlier models combined. Even while the PDP-9 was being introduced, its replacement was being designed, and was introduced as 1969's
PDP-15, which re-implemented the PDP-9 using
integrated circuits in place of modules. Much faster than the PDP-9 even in basic form, the PDP-15 also included a
floating-point unit and a separate
input/output processor for further performance gains. Over 400 PDP-15's were ordered in the first eight months of production, and production eventually amounted to 790 examples in 12 basic models. a machine that was small and inexpensive enough to be dedicated to a single task even in a small lab. Seeing the success of the LINC, in 1963 DEC took the basic logic design but stripped away the extensive A to D systems to produce the
PDP-5. The new machine, the first outside the PDP-1 mould, was introduced at
WESCON on August 11, 1963. A 1964 ad expressed the main advantage of the PDP-5, "Now you can own the PDP-5 computer for what a core memory alone used to cost: $27,000". 116 PDP-5s were produced until the lines were shut down in early 1967. Like the PDP-1 before it, the PDP-5 inspired a series of newer models based on the same basic design that would go on to be more famous than its parent. On March 22, 1965, DEC introduced the
PDP-8, which replaced the PDP-5's modules with the new R-series modules using Flip Chips. The machine was re-packaged into a small tabletop case, which remains distinctive for its use of smoked plastic over the CPU which allowed one to easily see the logic modules plugged into the wire-wrapped backplane of the CPU. Sold standard with 4 kWords of 12-bit core memory and a
Teletype Model 33 ASR for basic input/output, the machine listed for only $18,000. The PDP-8 is referred to as the first
real minicomputer because of its sub-$25,000 price. Sales were, unsurprisingly, very strong, and helped by the fact that several competitors had just entered the market with machines aimed directly at the PDP-5's market space, which the PDP-8 trounced. This gave the company two years of unrestricted leadership, and eventually 1450 "straight eight" machines were produced before it was replaced by newer implementations of the same basic design. DEC hit an even lower price-point with the PDP-8/S, the S for "serial". As the name implies the /S used a serial arithmetic unit, which was much slower but reduced costs so much that the system sold for under $10,000. DEC then used the new PDP-8 design as the basis for a new LINC, the two-processor
LINC-8. The LINC-8 used one PDP-8 CPU and a separate LINC CPU, and included instructions to switch from one to the other. This allowed customers to run their existing LINC programs, or "upgrade" to the PDP-8, all in software. Although not a huge seller, 142 LINC-8s were sold starting at $38,500. Newer circuitry designs led to the PDP-8/I and PDP-8/L in 1968. In 1975, one year after an agreement between DEC and
Intersil, the
Intersil 6100 chip was launched, effectively a PDP-8 on a chip. This was a way to allow PDP-8 software to be run even after the official end-of-life announcement for the DEC PDP-8 product line.
PDP-6 and PDP-10 families (1963 and 1968) While the PDP-5 introduced a lower-cost line, 1963's
PDP-6 was intended to take DEC into the
mainframe market with a
36-bit machine. However, the PDP-6 proved to be a "hard sell" with customers, as it offered few obvious advantages over similar machines from the better-established vendors like
IBM or
Honeywell, in spite of its low cost around $300,000. Only 23 were sold, or 26 depending on the source, and unlike other models the low sales meant the PDP-6 was not improved with successor versions. However, the PDP-6 is historically important as the platform that introduced "Monitor", an early
time-sharing operating system that would evolve into the widely used
TOPS-10. When newer Flip Chip packaging allowed the PDP-6 to be re-implemented at a much lower cost, DEC took the opportunity to refine their 36-bit design, introducing the
PDP-10 in 1968. The PDP-10 was as much a success as the PDP-6 was a commercial failure; about 700 mainframe PDP-10s were sold before production ended in 1984. This led the leaders of the PDP-X project to leave DEC and start
Data General, whose 16-bit
Data General Nova was released in 1969 and was a huge success. The success of the Nova finally prompted DEC to take the switch seriously, and they began a crash program to introduce a 16-bit machine of their own. The new system was designed primarily by Harold McFarland,
Gordon Bell, Roger Cady, and others. The project was able to leap forward in design with the arrival of Harold McFarland, who had been researching 16-bit designs at
Carnegie Mellon University. One of his simpler designs became the basis for the new design, although when they first viewed the proposal, management was not impressed and almost cancelled it. The evolution of the PDP-11 followed earlier systems, eventually including a single-user deskside personal computer form, the MicroPDP-11. In total, around 600,000 PDP-11s of all models were sold, and a wide variety of third-party peripheral vendors had also entered the computer product ecosystem. It was even sold in kit form as the
Heathkit H11, although it proved too expensive for
Heathkit's traditional hobbyist market.
VAX (1977) The introduction of
semiconductor memory in the early 1970s, and especially
dynamic RAM shortly thereafter, led to dramatic reductions in the price of memory as the effects of
Moore's Law were felt. Within years, it was common to equip a machine with all the memory it could address, typically 64 KB on 16-bit machines. This led vendors to introduce new designs with the ability to address more memory, often by extending the address format to 18 or 24 bits in machines that were otherwise similar to their earlier 16-bit designs. In contrast, DEC decided to make a more radical departure. In 1976, they began the design of a machine whose entire architecture was expanded from the 16-bit PDP-11 to a new 32-bit basis. This would allow the addressing of very large memories, which were to be controlled by a new
virtual memory system, and would also improve performance by processing twice as much data at a time. The system would, however, maintain compatibility with the PDP-11, by operating in a second mode that sent its 16-bit words into the 32-bit internals, while mapping the PDP-11's 16-bit memory space into the larger virtual 32-bit space. Supporting the VAX's success was the
VT52, one of the most successful
smart terminals. Building on earlier less successful models, the
VT05 and
VT50, the VT52 was the first terminal that did everything one might want in a single inexpensive chassis. The VT52 was followed by the even more successful
VT100 and its follow-ons, making DEC one of the largest terminal vendors in the industry. This was supported by a line of inexpensive
computer printers, the
DECwriter line. With the VT and DECwriter series, DEC could now offer a complete top-to-bottom system from computer to all peripherals, which formerly required collecting the required devices from different suppliers. The VAX processor architecture and family of systems evolved and expanded through several generations during the 1980s, culminating in the
NVAX microprocessor implementation and
VAX 7000/10000 series in the early 1990s.
Early microcomputers (1982–1986) When a DEC research group demonstrated two prototype
microcomputers in 1974—before the debut of the
MITS Altair—Olsen chose to not proceed with the project. The company similarly rejected another personal computer proposal in 1977. At the time these systems were of limited utility, and Olsen famously derided them in 1977, stating "There is no reason for any individual to have a computer in his home." Unsurprisingly, DEC did not put much effort into the microcomputer area in the early days of the market. In 1977, the
Heathkit H11 was announced; a PDP-11 in kit form. At the beginning of the 1980s, DEC built the
VT180 (codenamed "Robin"), which was a
VT100 terminal with an added
Z80-based microcomputer running
CP/M, but this product was initially available only to DEC employees. It was only after IBM had successfully launched the
IBM PC in 1981 that DEC responded with their own systems. In 1982, DEC introduced not one, but three incompatible machines which were each tied to different
proprietary architectures. The first, the
DEC Professional, was based on the PDP-11/23 (and later, the 11/73) running the
RSX-11M+ derived, but menu-driven,
P/OS ("Professional Operating System"). This DEC machine easily outperformed the PC, but was more expensive than, and completely incompatible with IBM PC hardware and software, offering far fewer options for customizing a system. Unlike CP/M and DOS microcomputers, every copy of every program for the Professional had to be provided with a unique key for the particular machine and CPU for which it was bought. At that time this was mainstream policy, because most computer software was either bought from the company that built the computer or custom-constructed for one client. However, the emerging third-party software industry disregarded the PDP-11/Professional line and concentrated on other microcomputers where distribution was easier. At DEC itself, creating better programs for the Professional was not a priority, perhaps from fear of cannibalizing the PDP-11 line. As a result, the Professional was a superior machine, running inferior software. In addition, a new user would have to learn an awkward, slow, and inflexible menu-based user interface which appeared to be radically different from
PC DOS or
CP/M, which were more commonly used on the 8080- and 8088-based microcomputers of the time. A second offering, the
DECmate II was the latest version of the PDP-8-based word processors, but not really suited to general computing, nor competitive with
Wang Laboratories' popular word processing equipment. , floor-mounted The most popular early DEC microcomputer was the dual-processor (Z80 and 8088)
Rainbow 100, which ran the 8-bit
CP/M operating system on the Z80 and the 16-bit
CP/M-86 operating system on the
Intel 8088 processor. It could also run a
UNIX System III implementation called
VENIX. Applications from standard CP/M could be re-compiled for the Rainbow, but by this time users were expecting custom-built (pre-compiled binary) applications such as
Lotus 1-2-3, which was eventually ported along with
MS-DOS 2.0 and introduced in late 1983. Although the Rainbow generated some press, it was unsuccessful due to its high price and lack of marketing and sales support. By late 1983 IBM was outselling DEC's personal computers by more than ten to one. A further system was introduced in 1986 as the
VAXmate, which included
Microsoft Windows 1.0 and used VAX/VMS-based file and print servers along with integration into DEC's own
DECnet-family, providing LAN/WAN connection from PC to mainframe or supermini. The VAXmate replaced the Rainbow, and in its standard form was the first widely marketed
diskless workstation.
Networking and clusters (1984) In 1984, DEC launched its first 10 Mbit/s
Ethernet. Ethernet allowed scalable networking, and
VAXcluster allowed scalable computing. Combined with
DECnet and Ethernet-based terminal servers (
LAT), DEC had produced a networked storage architecture which allowed them to compete directly with IBM. Ethernet replaced
Token Ring, and went on to become the dominant networking model in use today. In September 1985, DEC became the
fifth company to register a
.com domain name (dec.com). Along with the hardware and protocols, DEC also introduced the
VAXcluster concept, which allowed several VAX machines to be tied together into a single larger storage system. VAXclusters allowed a DEC-based company to scale their services by adding new machines to the cluster at any time, as opposed to buying a faster machine and using that to replace a slower one. The flexibility this offered was compelling, and allowed DEC to attack high-end markets formerly out of their reach.
Late 1980s diversification The PDP-11 and VAX lines continued to sell in record numbers. Better yet, DEC was competing very well against the market leader, IBM, taking an estimated $2 billion away from them in the mid-1980s. In 1986, DEC's profits rose 38% when the rest of the computer industry experienced a downturn, and by 1987 the company was threatening IBM's number one position in the computer industry. Not long thereafter came IBM's "VAX killer" offerings, at a time when DEC had twice the sales of IBM in the mid-range computer market. At its peak, DEC was the second-largest computer company in the world, with over 100,000 employees. It was during this time that the company branched out development into a wide variety of projects that were far from its core business in computer equipment. The company invested heavily in custom software. In the 1970s and earlier, most software was custom-written to serve a specific task, but by the 1980s the introduction of
relational databases and similar systems allowed powerful software to be built in a modular fashion, potentially saving enormous amounts of development time. Software companies like
Oracle became the new darlings of the industry, and DEC started their own efforts in every "hot" niche, in some cases several projects for the same niche. Some of these products competed with DEC's own partners, notably
Rdb which competed with Oracle's products on the VAX, part of a major partnership only a few years earlier. Although many of these products were well designed, most of them were DEC-only or DEC-centric, and customers frequently ignored them and used third-party products instead. This problem was further exacerbated by Olsen's aversion to traditional advertising and his belief that well-engineered products would sell themselves. Hundreds of millions of dollars were spent on these projects, at the same time that workstations using
RISC microprocessors were starting to approach VAX CPUs in performance.
Early 1990s faltering and attempted turnaround 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. The company recognized that RISC offered at least twice as many
MIPS per cost as VAX, but funded so many competing projects in reaction during the 1980s that it lost control of its strategy until the early 1990s. Constrained by the huge success of their
VAX and
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
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. The PRISM project was accompanied by the
MICA project, which intended to consolidate VMS and ULTRIX into a single operating system. 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 January 11, 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 (1992) The press described DECstation as a defensive product with which DEC would capture some of the inevitable migration of VAX customers to RISC, even as it and comparable products from rivals would greatly increase the migration. 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. It is one of the first "pure" 64-bit
microprocessor architectures and implementations rather than an extension of an earlier 32-bit architecture. The Alpha offered class-leading performance at its launch and was used in the massively-parallel
Cray T3D. Subsequent variants continued that performance trend into the 2000s, along with the Alpha-derived Pentium Pro, II, and III CPUs. An AlphaServer SC45 supercomputer was still ranked No. 6 in the world in November 2004. Alpha-based computers comprising the DEC AXP series, later the
AlphaStation, and
AlphaServer series respectively superseded both the VAX and MIPS architecture in DEC's product lines. They supported
OpenVMS, DEC
OSF/1 AXP (later known as
Digital Unix or Tru64 UNIX) and Microsoft's then-new operating system,
Windows NT, an operating system made possible by ex-Digital Equipment Corporation engineers. In 1998, following the takeover by Compaq Computer Corporation, 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.
StrongARM (1995) In the mid-1990s, Digital Semiconductor collaborated with
ARM Limited to produce the
StrongARM microprocessor. This was based in part on ARM7 and in part on DEC technologies like Alpha, and was targeted at
embedded systems and portable devices. It was highly compatible with the ARMv4 architecture and was very successful, competing effectively against rivals such as the
SuperH and
MIPS architectures in the
personal digital assistant market.
Microsoft subsequently dropped support for these other architectures in their
Pocket PC platform. In 1997, as part of a lawsuit settlement, the
StrongARM intellectual property was sold to
Intel. They continued to produce
StrongARM, as well as developing it into the
XScale architecture. Intel subsequently sold this business to
Marvell Technology Group in 2006.
Palmer's reign (1992–1998) At its peak in the late 1980s, DEC had $14 billion in sales and ranked among the most profitable companies in the US. With its strong staff of engineers, DEC was expected to usher in the age of personal computers, but the commonly misunderstood belief then argued by the board to its shareholders was that Mr. Olsen was openly skeptical of the desktop machines, stating "the personal computer will fall flat on its face in business", and regarding them as "toys" used for playing video games. This was made in 1977 about what could be more characterised as home automation devices. By 1991 DEC was still unable to sell PCs to its customers, which standardized on other vendors like Compaq and HP. The board forced Olsen to resign as president in July 1992 after two years of losses in operating income. He was replaced by
Robert Palmer as the company's president. DEC's board of directors also granted Palmer the title of chief executive officer ("CEO"), a title that had never been used during DEC'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. Alpha was so important to the company that
PC Week wrote of its introduction, "Beleaguered Digital Equipment Corp. will begin this week what may be the fight of its life". DEC was, the magazine said, "undergoing wrenching organization change, including thousands of layoffs". By then DEC was stating when marketing
DECpc that while "the Digital of yesterday was not known for competitive prices, this new line of PC offerings is competitive in features and price", and bragging about its more than $1 billion in annual
mail order sales. Palmer restructured DEC into nine business units that reported directly to him. Nonetheless, DEC continued to suffer record losses, 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 DEC, and his position was not filled. A 35-year company veteran, he had joined DEC in 1958 as the company's 12th employee, passing up a chance to work for Bell Laboratories in New Jersey to work for DEC. 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. 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 DEC reported its first profitable quarter in several years. However, on April 15, 1994, DEC 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% 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 DEC's lucrative service and maintenance business (this made up more than a third of DEC's revenue of $14 billion in the 1993 fiscal year), which declined 11% year over year to $1.5 billion in the most recent quarter. When Olsen resigned, an industry analyst said "If Alpha fails, DEC is dead". Market acceptance of Alpha computers and chips was 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. DEC had also made a strong push into personal computers and workstations, which had even lower margins than Alpha computers and chips. Also, DEC 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). DEC's problems were similar to that of larger rival IBM, due to the fundamental shift in the computer industry that made it unlikely that DEC 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.
Selloffs 425SE Color: a notebook computer released by Digital in 1993 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. • 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.
Acquisition by Compaq (1998) Through 1997, DEC began discussions with
Compaq on a possible merger. Several years earlier, Compaq had considered a bid for DEC but became seriously interested only after DEC's major divestments and refocusing on the Internet in 1997. At that time, Compaq was making strong moves into the enterprise market, and DEC's multivendor global services organization and customer support centers offered a real opportunity to expand their support and sales worldwide. Compaq was not interested in a number of DEC's product lines, which led to the series of sell-offs. Notable among these was DEC's
Hudson Fab, which made most of their custom chips, a market that made little sense to Compaq's "industry standard" marketing. DEC had previously sold its semiconductor plant in
South Queensferry to Motorola in 1995, with an understanding that Motorola would continue to produce Alpha processors at the facility, along with continuing a two-year foundry agreement with AMD to continue producing the Am486 processor. This led to an interesting solution to the problem of selling off the division for a reasonable profit. 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 fab. On January 26, 1998, what remained of the company was sold to Compaq in what was the largest merger up to that time in the computer industry. At the time of Compaq's acquisition announcement, DEC had a total of 53,500 employees, down from a peak of 130,000 in the 1980s, but it still employed about 65% more people than Compaq to produce about half the volume of sales revenues. After the merger closed, Compaq moved aggressively to reduce DEC's high selling, general, and administrative (SG&A) costs (equal to 24% of total 1997 revenues) and bring them more in line with Compaq's SG&A expense ratio of 12% 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 DEC employees inherited from the merger. DEC'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 DEC, as a result of the Compaq acquisition. The Digital logo was used up until 2004, even after the company ceased to exist, as the logo of Digital GlobalSoft, an IT services company in India (which was a 51% 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. Compaq transferred the DEC company archives to the
Computer History Museum in 2004. == Research and people ==