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EMC cuts hundreds of employees, says move is routine

The storage hardware maker lays off several hundred employees but says the cuts aren't related to economic woes.

Storage hardware maker EMC laid off several hundred employees but said the cuts weren't related to economic woes.

The Hopkinton, Mass., company shed several hundred employees as a result of standard annual performance reviews and reevaluation of the types of employees needed to support the company's strategy, said spokesman Mark Frederickson.

The cuts were not driven by the overall economic slump in the technology industry, Frederick said. The company has hired 1,000 new workers so far in 2001 and will hire 7,000 by year's end.

EMC, which beat financial analysts' earnings expectations in January, has said it doesn't foresee a spending slowdown in the first half of 2001, unlike competing high-end hardware companies such as Hewlett-Packard and Sun Microsystems. Some data storage companies, such as Network Appliance and Inrange Technologies, have been insulated from the economic slowdown.

Storage is a "very strategic investment," Fredrickson said, "more strategic than servers, more strategic than new applications, and certainly more important than desktop PCs."

Wall Street, however, was less convinced. Investors sent EMC shares down $4, or 7 percent, to $52.47 in midday trading Monday.

Among those unconvinced about the durability of storage stocks was Piper Jaffray analyst Ashok Kumar. "The storage industry, including market analyst companies, have been espousing the theory that storage purchases are not (discretionary) and that storage would continue to be a relatively hot product area even if the rest of the industry were to experience a down cycle," Kumar wrote in a report Monday. However, "in a weak economy, corporations will try to better utilize existing storage resources" and will delay purchases, he wrote.

Though EMC's cuts this year were larger numerically than in years past, it affected the same proportion of the growing company. EMC had 24,000 employees by the end of last year, compared with 17,500 a year earlier.

EMC has been shifting from storage hardware to software that augments the hardware and makes it easier to use. More recently, the company has been moving toward more network services, including a reorganization to focus on network technology. Last week, EMC added a new division to work on sending rich media such as video and audio over the Internet.

Each time the company adjusts direction, "some people's skill sets don't match the future needs as much as they used to," Fredrickson said. "When you grow this fast, if you don't go back and constantly assess the skill sets of people as related to the business needs today, you can become bloated and bureaucratic."

The company's new hires were in sales, support and engineering, Fredrickson said.

Job cuts and new divisions aren't the only shifts going on at EMC. In January, the company promoted Joe Tucci to chief executive and named former CEO Mike Ruettgers chairman of the board.