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EMC Sees Fewer IT Dollars Spent Vs. Year Ago

Despite the promises of research analysts that IT expenditures will continue to pour into storage systems, data storage giant EMC Corp. said it now appears that "there are fewer dollars being invested in information technology than a year ago."

Accordingly, the Hopkinton, Mass.-based company late Thursday advised that second quarter profits would be only a fraction of what Wall Street had anticipated. Earnings per share are now estimated to be in the range of 4 cents to 6 cents a share on revenue of approximately $2 billion. Wall Street was expecting 17 cents a share.

"The earnings results for EMC's major customers - the bulk of the S&P 500, for example - have been like a ball rolling down a hill for each of the past three quarters," said Joe Tucci, EMC's President and CEO.

"When our customers earn less money, most of them have less to spend on IT, and they take a longer time to spend what they do have. That means lowered revenue and profitability for EMC. We are helping customers manage through their fiscal constraints by delivering more value for their storage dollar than they have ever been able to obtain, but the associated impact on EMC's margins is more significant than anticipated."

By that measure, surely other technology companies will continue to suffer during the second quarter reporting period, which kicks into high gear next week. Indeed, Advanced Micro Devices (AMD) late Thursday also projected lower-than-expected earnings of 3 to 5 cents a share after a 11-percent decline in second quarter revenue.

However, expectations weren't as high for chip makers and PC vendors as they were for storage companies like EMC.

Over the past three months, though, EMC has needed to re-examine its expansion plans and cut over 1,000 jobs.