EMC sales drop; layoffs continue

Storage giant EMC Corp. reported recently that its third-quarter sales dropped by US$51 million compared with the second quarter, a slide it predicted earlier this month and attributed to a reluctance by IT managers to spend on new projects.

EMC President and CEO Joe Tucci said in a statement that sales were down because customers are “underspending their existing budgets, striving to balance expenses in order to offset their own revenue shortfalls.”

Sales for EMC during the quarter, which ended Sept. 30, totaled US$1.26 billion, a 4 percent increase over last year’s third quarter, but a drop of 9 per cent from the second quarter of 2002. The company reported net income of US$21 million this quarter.

“As a result, we are taking further steps to align our costs with the realities of this painful economy,” Tucci said.

Bill Teuber, EMC’s chief financial officer, said the company would “extend” its cost reductions, which include laying off 1,350 employees, or 7 per cent of its worldwide workforce, dropping its total number of workers to 17,000. EMC announced the latest round of layoffs Oct. 3.

“We expect the majority of this reduction will be completed during the fourth quarter of 2002,” Teuber said.

EMC has been focusing its attention on the midrange marketplace. In the past few months, it launched two arrays that will be sold by partner Dell Computer Corp.

Salomon Smith Barney research analyst Clinton Vaughan said in a research note that EMC has gained share in the midrange market this quarter while losing ground on its high-end Symmetrix arrays “due to tempered demand in front of its upcoming Symmetrix 6 product launch.”

Overall, Hopkinton, Mass.-based EMC lost about 1.7 per cent in market share quarter over quarter, while IBM and Hitachi Ltd. each gained about 1 per cent, Vaughan said.

“Both IBM and Hitachi recently launched new high-end storage products which gave them a boost in [the third quarter] after eroding/stalling their shares in [the first half of 2001],” Vaughan said.

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