A spokesman confirmed yesterday that the chief executive, Robert Palmer, warned staff on Tuesday that Digital's survival was at stake and told them the firm's revenue per employee 'suggests a company of 65,000 people or fewer.'
From a 1989 high of 137,000 employees, Digital employs 85,000 full-time people around the world.
'He wanted to make it clear that layoffs are unavoidable,' a spokesman said. 'Even if business improves, this is not a problem you can sell your way out of.'
Last month Digital revealed an unexpected quarterly loss of almost dollars 200m ( pounds 136m). After losing some dollars 3bn since the beginning of the 1990s the big computer maker - once the world's second-largest after IBM - had appeared to be on the road to recovery until the loss, which seems to have surprised Mr Palmer as much as anyone.
In his message to employees this week, Mr Palmer said Digital's operations would be profitable by the end of the year, and left little doubt that it would sell less promising divisions to achieve that goal.
Digital had already announced some 7,000 redundancies. Company officials hinted yesterday that the numbers of jobs lost could eventually total more than 20,000, calling Mr Palmer's number a 'snapshot in time,' and noting that revenue per employee has been rising constantly across the industry.