Power Tools 1993 October - Disc 2/Power Tools (Disc 2)(October 1993)(HP).iso/hotlines/cpethl/decabrdn.txt

Text File | 1992-08-18 | 14KB | 253 lines

Alpha Status Report, April 17, 1992

Background

The introduction of Digital's Alpha RISC architecture comes at an
awkward time for the company.  In January and again in April 1992,
Digital announced its first-ever operating losses.  The company has
been involved in the continuing turmoil of downsizing and
restructuring.  Several high level executives have recently departed.
And critical products and key supplier relationships, announced within
the last 24-36 months, seem to have quietly been shelved without clear
explanation.  Specifically, these include ACE/MIPS and the VAX 9000.
(For more details see also Aberdeen's Market Viewpoint -- Digital
Mainframe Systems: Casey at the Bat, April 1992).

No matter how powerful Alpha-based products eventually turn out to be,
two issues are becoming apparent.  First, Digital finally decided that
it could not survive as the only major systems supplier without its own
RISC.  Digital was forced to turn to Alpha after the failure of the VAX
9000 at the high-end and after suffering delays and lack of performance
with partner MIPS on the R4000.  Second, in Aberdeen's opinion,
Digital's management and field organizations have thus far been
handling the Alpha migration issue badly.  Rather than presenting
realistic expectations for system and software delivery to the client
and prospect base, management panicked in Q1/92 and accelerated Alpha
marketing programs.  This had the inevitable result of acting as a
powerful anesthetic on VAX orders.

Although the VAX 6000-600 family, introduced last October, has industry
leading TPC-A price performance characteristics, these systems had only
been in volume delivery for four-to-five weeks before the Alpha blitz
completely neutralized sales efforts for the quarter.

Recent Financial Results

Digital has now compiled the unenviable record of two consecutive
quarterly operating losses amounting to nearly half a billion dollars.
This has occurred despite reductions in headcount with worldwide
employment now at approximately 116,000.  Briefly stated, the major
problems are these:

** Digital has no products at the high-end with which its field can
compete with IBM.  Customers interviewed by Aberdeen find the
multiprocessing VAX 6000 too complicated to tune for data center
production applications as an alternative to mainframes.  The AS/400
and HP 9000 continue as popular mid-range alternatives to DEC VAX.

** Digital's growth in services revenues -- which generally includes
not only hardware field service, but also systems integration, software
development and network development -- is limited to approximately 300
DEC "named accounts."  While service revenues continue to climb, the
growth rate is declining.  Even the largest 300 customers only have so
much budget to allocate.  And Digital has finite personnel resources
with which to pursue the market opportunity.

** It appears that Digital's workstation unit shipments grew in the
first quarter calendar 1992.  However, Digital is still having a rocky
time with negative market perceptions concerning their status as a
legitimate PC supplier.  The company's relationship with Apple has
cooled in view of IBM/Apple alliances.  And Digital's increasingly warm
relationship with Microsoft is still based primarily on product futures
-- such as the NT operating system.  Pathworks, the PC integration
software included in NAS (Network Applications Support) is, however,
popular.  Pathworks is based on Microsoft's LAN Manager.

** The MIPS R3000-based DECstation 5000 workstations are designed with
a daughter card to provide an efficient upgrade to the R4000.  These
have sold well for DEC -- especially early in 1992.  Many workstation
market customers seemed to continue to buy on an opportunistic,
project-driven basis.  Thus the Alpha upgrade and transition issues
that were so damaging to the VAX 4000 and VAX 6000 order rate, do not
appear to have had as much impact on workstation sales -- yet.
Workstation clients continue to appreciate Digital's strength in
networking.  Digital also seems to appeal to the price sensitive
segment of the market.  This is consistent with the high unit volume
shipment results -- with poor margins.

** We believe, however, that Alpha will likely contribute to even more
customer confusion about Digital's workstation products and strategy in
the coming months.  Alpha's VMS (read VAXstation category) leanings --
in the near term -- will be unappealing to an Open Systems and Unix
prospect.  Lack of binary compatible applications with MIPS will be
another strong negative.

Next Steps

Digital Equipment will attempt massive damage control at the upcoming
DECWORLD which takes place in Boston from April 27 to May 15th.  We
expect that as Digital continues to attempt to accelerate Alpha
products -- and intensify marketing programs -- that customers
returning from DECWORLD will have received a heavy sell on the benefits
of Alpha as well as more details about specific products and shipment
timetables.  Although Aberdeen does not believe that this will result
in a buyer stampede, it is possible that Digital will stabilize the
current financial situation by offering some kind of no-risk upgrade
programs to create an early stream of orders and cash.  But VAX
6000-600, not workstations, will be the focal point of this campaign.
We believe that the workstation group will likely emphasize that with
the R5000, it's business as usual.

The Facts, Ma'am, Just the Facts

Here is Aberdeen's realistic, April assessment of the Alpha situation.

Alpha's architectural design center is focused toward high-end systems.
This means simply that we are likely to see more products emerge from
the Alpha program in the high-performance workstation segment and
multi-user systems arena than in the $5000 per seat commercial
workstation space.  The MIPS R4000, much like the Sparc Viking chip,
has a design center closer to the low-end of the market.  Alpha, like
RS-6000 and Precision Architecture, is positioned up the power curve.
Therefore, customers should expect that the native benefits of the
Alpha architecture are most readily obtained in more powerful packages.
Specific to this point of higher-end system design, Digital's Alpha
produces 30 watts compared to the 15-watt PA7100 chips from
Hewlett-Packard.

Another outcome of this design issue, is that although its MIPS
relationship has obviously deteriorated, Digital will continue to not
only support its MIPS-based workstation customers, but also likely
continue with current plans to use the R4000 to aggressively compete
with Sun Microsystems at the low-cost-per-seat end of the workstation
market.  Aberdeen believes that the combination of two factors, (the
high-end Alpha design center and the revenue potential of an existing
DECstation 5000 workstation base) suggests that R4000 workstations will
be sold by Digital throughout 1993 using its OSF/1 operating system
release.  Clearly, this means that Digital cannot have binary
compatibility with high-end Alpha systems -- at least until OSF/1
porting is completed for Alpha in mid-to- late 1993.

Aberdeen also expects that when the Alpha dust settles late in 1992,
Digital will attempt to salvage ACE with its MIPS-based machines, as
well as with Intel-based, Microsoft NT commercial workstations.

Digital's Hudson, Massachusetts semiconductor facility is currently
producing 83-MHz chips with an advanced CMOS process.  However, these
N-VAX chips running at 83-MHz are not based upon the Alpha
architecture.  Instead, N-VAX chips from Hudson are the most advanced
implementation of the VAX architecture and are used as a CPU engine in
Digital's very aggressively-priced VAX 6000-6XX.

Hudson is also responsible for Alpha.  The first Alpha microprocessor
produced at the facility, the 21064-AA, is a 200-MHz product.  It was
used to showcase Digital' s Alpha project at the International Solid
State Circuits Conference in February.  200-MHz represents peak
performance for Alpha at the present time.  Aberdeen still expects that
early Alpha-based systems will be powered by microprocessors running at
approximately 150 MHz.  These 150-MHz parts are already in production
on the line in Hudson.  But specifics -- based upon facts -- about
yield as well as details on packaging are not available at this
writing.  Digital has announced that it anticipates being able to
deliver the 21064-AA in quantities of 1000 for $1,650 each beginning in
July 1992.  Aberdeen believes that volume production of a 150 MHz part
has an 89% probability by August 1992.

Perhaps the most critical, if least discussed, issue concerning Alpha
and its impact on both Digital and Digital's customers has to do with
software conversion.  Alpha was not intended to be binary compatible
with VAX/VMS.  While Digital presumably could have included a "VAX
compatibility mode" in Alpha, this would have penalized performance for
what in retrospect would likely have been a few-year transition issue
for users.

The first issue to keep in mind with Alpha software, concerns the
fundamental difference between Reduced Instructions (RISC) and Complex
Instructions (CISC).  With all RISC implementations, software compilers
take on an increasingly important role.  It is the RISC compiler, after
all, that must execute in software what previously was handled by the
microprocessor in CISC implementations.  From an Alpha performance
perspective, it is safe to say that no one yet knows how well designed
or how well tuned Digital's compilers will be.  Furthermore, first
generation Alpha is superpiplined and superscalar -- a complex design
under any circumstances.  Alpha contains primary cache on the
microprocessor and uses off-chip, secondary cache running at 66 MHz.
Digital has no demonstrated experience in this cache and memory
management software relative to RISC.

A second critical transition issue has to do with other types of
systems software.  Digital has maintained that Alpha is
operating-system neutral, yet according to announced schedules, VMS
will appear before OSF/1.  The company's software development and
porting teams are clearly focused on moving millions of lines of VMS
code to the Alpha platforms as a first priority.  Although Digital has
highly automated this process with CASE tools -- probably more advanced
than those available to Hewlett-Packard or IBM in the early days of
their RISC projects -- porting VMS and its robust software environment
includiing Rdb, VAXcluster, networking, and transaction processing is
still an enormous challenge.  Not only is the pace of this migration
difficult to measure, the overall performance of resulting Alpha-based
systems is still completely unknown.

Aberdeen expects that the complete VMS software transition will take a
minimum of two years.  This means that it will be 1994 or perhaps even
early 1995 before Alpha systems offer a meaningful high-end software
environment alternative to current VAX customers and prospects.  OSF/1
or micro-kernel-based OSF/2 release plans are even less well
understood.

Summary

Aberdeen believes that Digital and its customers would have been best
served by a more gradual transition to Alpha marketing doctrine.  Now,
however, the company faces the potential of a widening gap between a
VAX that appears doomed to obsolescence and next-generation, advanced
Alpha systems.  Thus Alpha presents serious business as well as
technology challenges to a company increasingly under siege.
Competitors are certainly going to take advantage of Digital's
blundering with undeliverable futures.

Aberdeen believes that Digital's Hudson facility can produce quantities
of 150- MHz Alpha microprocessors in 1992.  These are already being
shipped a few at a time to large customers in primitive systems
packages for testing and evaluation.  At this writing, it appears that
microprocessor hardware stability (i.e. chip yields) is less of a
problem than potential snags in software migration (i.e. compilers and
robust VMS applications).

We believe that Digital will introduce or showcase several products
based upon Alpha microprocessors, beginning at DECWORLD later this
month.  These systems are likely to be predominantly packaged for the
uniprocessor mid-range during the early stages of product roll-out Q1,
1993 for the earliest volume shipments.  The earliest systems will run
Open VMS, based upon release 5.4.

Finally, software is the real potential Achilles Heel of the first
phase of the transition.  While Digital hopes most applications will
require only a "recompile and run" investment of customer/ISV time and
energy, this statement over-simplifies the enormous challenges and
risks that lie ahead.  The bottom line is that without software, Alpha
-- even at 200 MHz -- is useless to Digital.

Even if Digital successfully meets these software hurdles during the
next 12-18 months, many other questions remain.  Will Alpha scale for
multiprocessing?  Has the architecture been designed for floating point
or integer?  What is the real benefit of a 64-bit architecture for
existing applications software?  How will the systems perform?
Aberdeen will continue to monitor each of these issues carefully over
the coming months.

It is clear from recent financial results that Digital no longer "has
it now!"  Digital has entered the RISC technology business much later
than its fierce rivals, Sun Microsystems, Hewlett-Packard, and even
IBM.  While the company gets high marks for recent public relations
campaigns that have created tremendous mindshare about Alpha, Digital
now faces daunting challenges as it attempts to turn an architecture
into fully functioning systems-level products -- and profits.  Aberdeen
cannot emphasize strongly enough that even flawless execution of this
business plan will take 24-36 months.  And during that time Digital
will face tremendous pressure from customers and competitors about its
confusing, piecemeal, point-product strategy.