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EMC set to slice research budget

The storage maker plans to cut back on research and development spending as it tries to stem mounting losses. A spokesman says areas of "overlap" will be affected.

Storage maker EMC plans to cut back on research and development spending, as it tries to pare costs and stem mounting losses.

see related story: Is EMC a takeover target? EMC, one of the dominant technology companies in recent years, has struggled mightily amid the technology slowdown, while pricing pressures have mounted from competitors such as IBM and Hitachi Data Systems. In a sign of the times, the company last week got into a squabble with Hitachi over a prominent customer.

EMC spent $711.8 million on research and development in the first nine months of 2001, an increase of 27 percent from the preceding year in an effort to "continue to improve its long-term competitive position," the company said in a filing with the Securities and Exchange Commission.

But the overall level of research spending is expected to decline in the next several quarters, the company said. EMC will spend about $900 million on research and development this year, and that figure should drop to $800 million next year, spokesman Michael Gallant said Tuesday. But, he noted, that figure is higher than the $783 million the company spent last year.

He said "virtually none" of the cuts would affect engineers in the development phase or involved in developing projects. Instead, he said, the cuts would hit areas such as the research and development division's IS, human resources and marketing departments, where there was "overlap" with other divisions.

The Hopkinton, Mass.-based company launched a restructuring project last month that included the elimination of 4,000 jobs and forced it to record a loss of almost $1 billion for the third quarter.

At the time, it announced cost-cutting measures designed to help save $800 million annually by the middle of next year and to allow the company to record a profit by the second half of next year.