EMC's profit drops, along with the spirits of 1,250 staff
17-10-2006
by The Register

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

EMC disclosed the job cuts on Tuesday as it handed in third quarter results. Revenue surged 19 percent during the period to USD2.82 billion. Even when excluding the help of recent acquisitions RSA and Network Intelligence, EMC enjoyed a 17 percent year-over-year revenue rise to USD2.78 billion -- 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 USD150 million and USD175 million. 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 USD284 million from USD422 million last year.

Chief executive 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 percent during the quarter to USD1.3 billion. Meanwhile, software license and maintenance revenue surged 25 percent to USD1.1 billion and services revenue rose seven percent to USD432 million.

The VMware subsidiary was a standout once again, growing revenue 86 percent to USD189 million.

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

The Register and its contents are copyright 2006 Situation Publishing. Reprinted with permission.