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EMC warns; layoffs on the way

The high-end storage seller says it doesn't expect to meet its goal of profitability in the second half of the year and will lay off about 1,380 workers.

EMC plans to cut its work force by 7 percent and doesn't expect to meet its goal of profitability in the second half of the year, the storage system company said Thursday.

EMC, which sells higher-end storage systems and the software used to manage them, warned that weak information technology spending has meant it needs to accelerate cost-cutting efforts. The company has been the target of IBM, Hewlett-Packard, Sun Microsystems and Hitachi Data Systems, rivals that lowered EMC's once-plump profit margins.

"The IT spending environment continues to be brutal," Chief Executive Joe Tucci said in a statement. "In fact, it got even worse at the very end of the quarter. Our third quarter was on track until late September."

For its third quarter 2002, the company expects revenue of about $1.25 billion and a loss of 2 cents per share, not including any special adjustments.

Merrill Lynch analyst Steve Milunovich had expected revenue of $1.39 billion.

In trading Thursday, EMC's shares had increased 13 cents, or 3 percent, to $5.01. But after the post-bell warning, the stock dropped 9 percent from its closing price, to $4.57.

Today's warning will be detailed when the company reports complete results Oct. 17.

The company will lay off about 1,380 people, leaving 17,000 in place, as part of new expense-reduction efforts.

Although EMC has been punished by a spending slump, it hasn't lost its aggressiveness. When HP filed a lawsuit claiming patent infringement, EMC lashed out with a countersuit the same day. And the company hasn't been afraid to cut prices deeply to curtail market-share losses, Milunovich said.