In 1987, Digital Equipment Corporation – DEC – was the second-largest computer company in the world, behind IBM. DEC started losing money in 1989, mass layoffs started shortly after that, and in 1998, Compaq bought the remains. Which wasn’t much. In 2001, HP bought Compaq. Today, DEC alumni lead several IT industry companies, including Red Hat. But DEC is barely a footnote in history.
How could a company filled with the smartest engineers on the planet fall so far, so fast?
Many analysts attribute DEC’s failure to missing the personal computer revolution and failing to recognize other market changes. While true, these were tactical failures. Look deeper. Poor leadership caused those tactical failures, and poor leadership killed DEC.
I spent 12 1/2 years of my career at DEC. I was an insider to some of the insanity leading up to my layoff on Jan. 31, 1994, and as part of my MBA coursework, I wrote this paper later in 1994 about DEC’s demise.
With the benefit of hindsight, I got most of it right. I missed a few details. I learned later, the conflict between top engineer, Dave Cutler and vice-president Jack Shields was more nuanced than I thought. Whatever the cause, Cutler and his team left DEC, joined Microsoft, and built Windows NT.
And after the board of directors fired company founder and popular CEO, Ken Olsen, they brought in Bob Palmer to turn as much of the company as possible into cash and sell the rest. That’s why Palmer crippled the company by selling products left and right to competitors or extortionists who quintupled customer license fees. He was doing the board’s bidding. The board wasn’t interested in turning DEC around. They wanted to cash out. But we didn’t know that at the time. I’ll bet many of us would have made different career decisions if we had.
Here’s an anecdotal story that sums up life at DEC during the Bob Palmer era. In Spring, 1997, three years after I was out, Microsoft put on an event in New York City called “Scalability Day,” where Bill Gates and others made a case about Microsoft products running at a (then) massive scale. Through an unlikely sequence of events, I was there, along with the TV networks and other press. Bob Palmer walked in, late, with an entourage of vice-presidents, all wearing nice suits. The vice-presidents shushed people out of an entire row of seats so Palmer could have the whole row to himself. He eventually joined Gates on stage, said a few words, and then the whole crew left. I talked to several DEC people that day and into the night. Watching their pain was depressing. And enlightening. I came back home, grateful I wasn’t part of it anymore. Here is what I wrote about that day back in 1997.
After Compaq bought DEC, and as a reward for shafting DEC’s customers and employees, Palmer walked away with $18 million. Many people are still mad about that. Here are my early 1998 thoughts.
Enjoy the history. But don’t dwell on it. We can’t change history, but we can learn from it and influence the future. Let’s do some influencing.