Before the personal-computer revolution came the minicomputer revolution. The Maynard, Mass.-based DEC broke the stranglehold of IBM and the “seven dwarf " mainframe makers and IBM by selling cheaper machines that didn’t require an army of specialists. That led Digital to $14 billion in sales for the 1991 fiscal year and explains why Fortune magazine in 1986 called Olsen “the most successful entrepreneur in the history of American business.”
Lately, most news out of Maynard has been bad. Digital’s stock plummeted 17 percent after DEC suffered a staggering $294 million quarterly loss. Worse, John Smith, a Digital senior vice president, said, “We can’t forecast at this point in time when we are going to turn profitable.” The company has lost several key executives, including its respected chief financial officer, James Osterhoff; two architects of Digital’s successful desktop-computer line are starting their own PC firm. Even the good news has a downside: earlier this year Digital announced a powerful new chip, dubbed Alpha-but with no Alpha computers likely to appear this year, many loyal DEC customers are staying on the sidelines. “They shot themselves in the foot,” says consultant John Logan of the Boston-based Aberdeen Group.
What worries critics and shareholders alike is that the company has seemed to drift under Olsen, who tends to keep a loose hand on the reins until a crisis hits. Some say that Olsen, 66, has resisted efforts to groom an heir to his throne. But they also worry that DEC’s corporate culture has neglected customers like Burke. Historically, the engineers have reigned supreme. “It’s been the ‘Field of Dreams’ marketing approach,” says David Smith, research director at International Data Group. “If we build it, they will come.” That attitude doesn’t work these days, says Barry James Folsom, formerly with DEC and now president of computer-component maker Radius in San Jose, Calif. “Customers are setting the rules.” Earlier this month Olsen announced a reorganization that puts product development under the marketing department-though “they’re basically engineers,” Olsen quickly says.
Don’t count Digital out. Olsen has surprised skeptics before. His company has $1.5 billion on the balance sheet and little debt. The company could have a winner in the superfast Alpha chip. Many new microprocessors require new hardware and soft-fuel for every new car. Meanwhile, however, the Alpha chip is compatible with both the VMS software in Digital’s current line of computers and UNIX, the industry standard. And this week the company will announce that the next-generation operating system from Microsoft, Windows NT, can also run on Alpha.
Before Alpha starts crunching numbers, heads could roll. George Colony of Forrester Research points out that HewlettPackard racks up as much in sales as DEC, but employs 85,000 people to DEC’S 116,000. One DEC worker is likely to keep his job: Olsen. Last year board members were rumored to be pressuring Olsen to commit himself to a succession plan. Olsen says there has always been one - but that it’s unwise to name an heir. “The press often wants to see someone crowned because that makes great news. Then when that person is dethroned it makes great news,” he says. Founders rarely loosen their hold easily, says Jeffrey Sonnenfeld, who heads Emory University’s Center for Leadership and Career Studies. He calls the reluctant ones “monarchs” who don’t leave until the board - or some higher authority-tells them to. One departed DEC exec says, " The man’s going to be there until he’s carried way.” Sonnenfeld says “Olsen has shown a great deal more humility” than monarchs - and expects to see a firm, though quiet, succession. Analyst Colony says Olsen wants to finish on a high note: “to make the company over one more time before he bows out.” If he pulls it off, it could be the neatest trick of his career. If not … well, computers mark time in nanoseconds. And the clock is ticking. Losing Ground
