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DEC merging Storage Business Unit with its Systems Business Unit
QUESTION:DEC merging Storage Business Unit with its Systems Business Unit
There are very few details of what this is all about in the DEC press
release, except that there is said to be some synergy involved. Would
anyone know what this is all about?
ANSWER: Here's my thoughts on what appears to be a slick exercise in creative
accounting...
Digital has been profitable on an overall basis for about a year and half
now. Nevertheless, several of the firm's business units have yet to
achieve sustained profitability, or the levels of profitability desired by
Bob Palmer and Co. Chief among these are Digital Semiconductor and the PC
Business Unit. Enrico Pesatori's Systems Business Unit might be finding it
difficult to reach its targets as well.
Even during DEC's darkest hours, the Components and Peripherals Business
Unit was profitable and remains so. StorageWorks is another big-time money
maker. And Windows NT revenues are growing quite nicely.
By colocating Windows NT with the PCBU, the PC unit can capitalize on
WNT's success. (It wouldn't surprise me to see the workstation segment
migrate over to the PC business, either.)
The annexation of the storage business into the Systems Business Unit is
sure to boost the bottom line of the latter organization.
And the realignment of the not-yet-profitable Digital Semiconductor unit
into the Components and Peripherals group will spare the much-maligned
chip business from intense scrutiny. Under the realigned business
structure, Digital will very likely be able to claim across-the-board
profitability. Yeah, that's the ticket!
This isn't to say that some of the realignments make good business sense.
After all, the CPBU sells a lot of PCI-based components, single board
computers, VME-based Alpha systems, et al that are manufactured by Digital
Semiconductor.
Colocating the WNT effort with the Intel-centric PCBU seems wise as well.
Not only is the bulk of DEC's WNT business based on the Intel platform,
the consolidation of OS and hardware is likely to simplify DEC's business
practices. One stop shopping sure beats playing phone tag with multiple
business units. On the other hand, it is incumbent on DEC to forcefully
articulate the fact that the realignment does not reflect diminished
support for WNT on Alpha. Despite the closer ties between the Intel and
WNT camps, DEC is banking on WNT to drive increased Alpha sales (stay
tuned until next month for some proof points).
So there is some synergy here. But I find it hard to believe that synergy
is the principal reason for bringing StorageWorks under the Systems
Business Unit umbrella. Yeah, storage gets sold with servers, but so does
networking gear. So where's the networking synergy?
All in all, methinks DEC is trying to ameliorate some of the side effects
of the Balkanized business unit strategy it has pursued for almost two
years. At the same time, I wouldn't be surprised to see the firm claim
"across-the-board profitability at the end of the fiscal year.
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