EMC posts loss, sees more cuts
The storage maker sees its net loss widen. It says it will continue to cut costs and jobs--and to battle IBM in a price war.
On a conference call with analysts, EMC said it had reduced staff from a peak of 24,500 down to 20,140 in the fourth quarter, adding that it plans to reach 19,000 by mid-2002.
That projection would mean EMC is looking to eliminate 1,140 more positions by the middle of 2002, on top of the 4,360 cut in 2001. The company said it is looking to cut jobs abroad.
"Expect us to squeeze out more costs," CEO Joe Tucci said. "I'm convinced a cost-conscious EMC will be an even tougher competitor."
Wall Street cheered the cost cutting moves, driving shares up 15 percent, or $2.29 to $16.85.
The company recorded sales of $1.51 billion and a net loss of $70 million, or 3 cents per share. Though this is a far cry from the profit of $563 million, or 25 cents per share, the company recorded a year ago, revenue and earnings improved from the third quarter and came in ahead of analyst expectations. First Call consensus was for a 7 cent per share loss on sales of $1.3 billion.
For the year, EMC recorded a loss of $508 million, or 23 cents per share, including a $675 million, or 31 cents per share, third-quarter restructuring charge, on sales of $7.09 billion.
Revenue for the year was off 20 percent from the year before. Many industry observers had thought storage would be one of the few areas to survive the tech-spending slowdown, but that has not been the case.
One of the few companies to actually top estimates at the beginning of 2001, EMC became the subject of takeover rumors and announced a major restructuring last fall.
"It's great to finish the year with momentum. Last year was painful for the entire technology sector, and it forced EMC to become a better company in many respects," said Tucci, who added that the price war may be abating a bit in the storage sector.
Chief Financial Officer Bill Teuber said the company projects a revenue decline of 5 percent in the first quarter sequentially, but added the company is "poised very well for profitability in the second half of the year."
Cash and investments increased to $5.1 billion at the end of the year and now represent more than 50 percent of total assets with "virtually no debt" said Teuber, who added that he expected "continued progress in 2002."
Revenue from networked information storage was up 52 percent from the third quarter to the fourth, revenue from information storage software rose 45 percent, and services revenue rose 15 percent.
For the full year, revenue from networked information storage rose 26 percent from a year ago to $2.68 billion. But total storage systems revenue fell 31 percent to $4.3 billion.
Revenue from information storage software was up 9 percent from 2000 to $1.56 billion, and services revenue for the full year was $972 million, up 59 percent from 2000.
Analysts were generally upbeat about EMC's report, but held some reservations. "EMC's key obstacle is the economy and not some of the more secular challenges that have concerned investors," said Laura Conigliaro, analyst at Goldman Sachs.
"There is no question EMC remains the category leader and, while we think EMC is better-positioned because of cost and expense measures, we remain concerned," said UBS Warburg analyst Don Young. "The competitive landscape also holds the potential for increased pricing pressure as new entrants move to increase their share of the enterprise storage market."