Economy Trips EMC, Q3 Loss Near $1B

Data storage giant EMC posted a third-quarter net loss of $945.2 million and will cut another 1,600 jobs in response to a sickly economy made worse by the Sept. 11 terrorist attacks.

Executives also took responsibility for not seeing the dropoff in demand sooner.

“We are mad at ourselves that we slipped in exectution in Q3,” said Joe Tucci, EMC’s CEO.

Falloff factors include: a slowing economy, made worse by the Sept. 11 terrorist attacks; price competition from IBM
and Hitachi (especially with smaller customers); and poor execution.

EMC posted a third-quarter net loss of $945.2 million, or 43 cents a share, a far cry from its net income of $458.2 million, or 20 cents a share. Revenue slipped to
$1.21 billion from $2.3 billion a year earlier. EMC is not forecasting a return to profitability the second half of next year.

The company will take a charge of $825 million for job cuts, excess inventory and facility consolidation.

Last month, the Hopkinton, Mass., company warned it would would not meet its financial targets. The figures represent EMC’s first quarter loss in a dozen years.

At the time, EMC said it would lay off 2,400 workers. That number has been bumped to 4,000 employees. Marketing and manufacturing employees as well as some redundant sales positions were hardest hit.

Some research and development staff were also laid off but key projects remain on track, the company said. Non-core projects, such as media server development has been shelved.

When the reductions are completed, EMC will have about 19,000 workers, compared to a high of 24.500 earlier this year.

Tucci said EMC is will introduce new products later this month and will also push its lower-end storage systems as companies hold back on major purchases. Cost cuts will also continue.

Shares of EMC, a strong performer for years, fell 12 percent after the earnings report. At midday, the stock traded at 11.83. In the last 52 weeks, the issue has ranged from 10.76 to 100.875.

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