Will Alpha Start A Wave For Dec?

Digital Equipment Corp. seems to be on an endless search for a way out of its slump. Selling others' computers and technology didn't work. Neither did cutting overhead and the payroll. So what's a $14 billion company to do? Begin anew, and DEC plans to do just that. On Feb. 25, DEC is set to unveil its latest revival plan in the form of a tiny, much-ballyhooed computer chip called Alpha. Says Peter C. Graham, Alpha program business manager: "We're betting our future on Alpha."

A reduced instruction-set computing, or RISC, chip, Alpha boasts awesome performance: It can process 150 million instructions per second (MIPS)--double that of any current RISC chip. It also will run all sorts of software, critical since DEC is counting on high-margin software sales to boost its bottom line.

Alpha will first appear in DEC's and other companies' computers early next year. DEC hopes that over the next few years Alpha-based machines will account for most of its revenues. Early reviews are promising. John L. Hennessy, chief scientist at rival MIPS Computer Systems Inc., labels Alpha "a tour de force."

AT A PRICE. But even a tour de force may not be enough in this hotly competitive market, which Alpha is entering late. RISC designs from IBM, Hewlett-Packard, MIPS, and Sun Microsystems are vying for computer-company endorsements. Sun has sold its design to companies making everything from notebook PCs to supercomputers. Others are pumping up their chips' speed. On Feb. 18, HP claimed its newest chip can do over 100 MIPS. A faster version is in the works. Since DEC's Alpha has been designed for speed, early versions will cost $3,400 each--as much as some workstations.

The bottom line: Alpha won't put DEC back on top. But it could stave off further customer defections. Mired in its worst slump ever, DEC's midrange computer sales are eroding so fast that it now faces an embarrassing second straight annual loss--an estimated $100 million for the year ending June 30. Even with Alpha, "it'll be hard for DEC to rejuvenate," notes Morgan Stanley & Co. analyst Steven Milunovich. If he's right, count on another DEC revival plan.

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