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Digital investors plan revolt

Investors in the company hold an informal meeting aimed at appointing new board members and a possible merger.

In an effort to come up with a viable solution to Digital Equipment's (DEC) continued losses and falling stock, investors held an informal meeting today that centered on appointing new board members and a possible merger.

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The session was the first part of a long process aimed at rejuvenating Digital's board of directors and its image. The next step for these investors is to take their demands to company executives, who were not present at this evening's meeting.

Digital has three options, said Herbert Denton, president of Providence Capital, who organized the meeting.

Discussions from the brainstorming session centered on the company's need to change its image from a product company to a services company, find a merger partner with complementary products, or bring some new, younger individuals to the company's board of directors, Denton said.

"Now we need to circle back to institutional shareholders that attended to see if there is a consensus, monitor upcoming quarterly results, both top- and bottom-line results, and see how receptive [Digital] might be to new nominees for the board," Denton said. He declined to name the investors who attended the meeting.

Denton added that the company needs to bring on individuals with strong skills in finance, marketing, and technology. "There is great opportunity because over half the board is over 70, and the nominating committee also is in the 70-plus range," he said.

The company disagrees. "To criticize the effectiveness of anyone based on age is simply naive. There are three board members over 70 years of age, and there is nothing wrong with that," Digital spokesman Dan Kaferle said. "Our board of directors brings a wealth of knowledge, commitment, and experience to Digital."

Digital's financial problems have been problem for the company for more than a year. For example, investors buying a $100 stake in Digital in 1991 would have found that investment fall to about $75 five years later, according to the company's proxy statement. That same $100 investment placed in an S&P 500 Computer System Index would be worth slightly more than $135 in the same period.

"Why hasn't the board taken action on what is a terrible loss of value over the past five years?" asked Bob Monks, a money manager at Lens and Digital investor, in an interview yesterday. "Shareholders have to be involved for the same reason that citizens have to be involved in a democracy. You can't expect a system to work for you unless you are actively involved in making it work."

Digital employees today announced they would state their plan of action for the company as well.

IG Metall and European Works Councils representatives, on behalf of about 20,000 European employees of Digital, and the Communications Workers of America will submit a review of Digital's business alternatives, in an effort to restore profitability and customer trust.

Their proposals will focus on enhancing the long-term value for shareholders while preserving jobs. The three groups oppose any proposals that would break up the company.