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.
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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.