Subject: More Dust Settling
Date: Mon, 26 Jan 98 23:10:29 -0500
From: "Jon 'maddog' Hall, USG Senior Leader" <>


Partially to answer Keith Baker's rant against Compaq, and partially to keep
you up-to-date with what is going on.....

Digital is to be a wholly owned subsidiary of Compaq.  We will continue to
make Alpha chips, boards and systems.  What will happen in the Intel PC space
is unknown.....but you would not be on this list if you were too concerned
about the Intel PC space....

One of the benefits to Compaq (according to this VP) is that they get good
engineers in a campus fairly close to Boston.  According to this VP, Compaq
has a difficult time attracting the number of engineers they need to Houston,
Texas, and they had been considering opening up an east-coast engineering
group.  This is not surprising.  Sun and (until recently) HP also have
campuses here.  Between all of this (and the fact that both Digital and
Compaq are actively hiring engineers) we do not expect any lay-offs of
Alpha engineering personel.

Nor do we anticipate any layoffs of support people.  In fact, we have a long
standing arrangement with Compaq previous to this to supply support to
Compaq's customers.  This just became easier, and I anticipate that we will
be hiring even more support people, both Intel and Alpha.

Finally, to answer Keith's question about how Compaq lowers prices, I will
clarify that prices of computers drop dramatically when they get to high
volume of manufacture for several reasons:

	o you can set up high volume lines to produce components and systems
	o you can order parts in much larger quantities

Manufacturing lines are set up to produce certain things.  Ideally what you
want to do is to set up a line to produce *exactly* the right amount of
widgets for *exactly* the life of the product.  No inventory anywhere,
just-in-time delivery of everything.  Now that we have all had a laugh.....
...because while it is good in theory, it hardly ever happens, and it is
more difficult for smaller lines and lower volumes.

The real truth is that you get as close as you can, BUT in a lot of ways
the larger the line, and the more you can produce on it in its life, the
more you make up for the tooling costs, and hold in-bound inventory in
check.  Ergo, manufacturing in larger numbers almost always helps.  Now,
if you can spread those widgets manufactured over two or more products, you
can even out your deliveries (taking into account lulls in sales performance),
and extend the life of the line.

So, "ramping up" for a large run helps.  Compared to what Compaq does in
any part of its manufacturing, Digital has small runs.

Now for the purchasing part:

Memory chips (for example) are memory chips.  Only certain companies make them.
But when a company that sells 1000 systems a month, each with 32 Meg in them
tries to compete with a company that sells 100,000 systems a month with 32 Meg
in them, guess who the memory company gives the better discount to?  The
better delivery dates (remember the "just in time" deliveries?)

Now hold that concept and apply it to disk drives, capacitors, resistors,
video displays, cables (ahhh, about expense...) and we have not
even talked about the concept of design yet.  And a lot of what Keith did not
like was the design, not the components.

This is exactly why Digital applauded when AMD said that they would make their
K7 use the same motherboards as Alpha.  This meant that there would not just
be a market for 10,000 Alpha boards, but 10,000,000 (some with Alpha and some
with K7s).  And (more importantly to our OEMS and to you, our end customers)
Digital could not supply all of those 10,000,000, so there would develop a
competative market for different board designs that met different needs.  And
prices would drop, perhaps to the same price as a "PC" motherboard.  Which
makes our OEM systems cheaper, which means more Alphas are sold.

Incideous, isn't it?  Selling more Alphas by selling more K7s, and from
a company that sold its FAB to Intel.

And don't get me wrong.....Compaq benefits from the increased volume of
Digital's market as we benfit from the increased volumes of their market.

Compaq has sold to a particular market in the past.  While you may not like
the fact that they built in a lot of the functionality onto the motherboard
so it could not be upgraded easily, this fit a certain portion of their
market. I do not believe that it is the market they wish to penetrate with
Digital's engineering and products, ergo you will probably see a different
style of engineering from the Alpha line.

As always, these are my observations (with a little input from the VP)
Actual reality may vary.

With this, it is late, and I hear a pizza calling me, and perhaps a beer
or two.  Let's let the dust settle a little more.

And now, back to technical discussions.

Jon "maddog" Hall                     Internet:
Senior Leader, UNIX Software Group    Executive Director, Linux International

Digital Equipment Corporation         Linux International
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