EMC's profit drops, along with the spirits of 1,250 staff

Sales surge

By Ashlee Vance in London • Get more from this author

Posted in Storage, 17th October 2006 14:03 GMT

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Despite strong third quarter storage and software sales, EMC plans to do away with 1,250 staff over the next year.

EMC today disclosed the job cuts as it handed in third quarter results. Revenue surged 19 per cent during the period to $2.82bn. Even when excluding the help of recent acquisitions RSA and Network Intelligence, EMC enjoyed a 17 per cent year-over-year revenue rise to $2.78bn – a company record.

The company, however, wants to clean house after acquiring 21 companies in three years. So, 1,250 staff will have to go by the end of 2007, costing EMC between $150m and $175m. The VMware subsidiary will not be touched by these moves.

Such cuts could improve EMC's bottom line over the long-term. During the third quarter, EMC watched as its profit dipped to $284m from $422m last year.

CEO Joe Tucci marched through about 400 words of marketing fluff in a prepared statement before taking the time to the address the job losses.

"These actions, while difficult, are necessary," Tucci said. "The time is right for us to accelerate the integration of EMC and most of the companies we have acquired over the past three years, create more efficient, centralised corporate functions, reduce management layers, and take greater advantage of opportunities to improve our overall cost structure."

EMC saw hardware revenue rise 19 per cent during the quarter to $1.3bn. Meanwhile, software license and maintenance revenue surged 25 per cent to $1.1bn and services revenue rose seven per cent to $432m.

The VMware subsidiary was a standout once again, growing revenue 86 per cent to $189m.

Investors have watched EMC string together 13 straight quarters of double-digit revenue growth. ®

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