EMC warns; layoffs on the way

EMC plans to cut its work force by 7 percent and doesn't expect to meet its goal of profitability in the second half of the year, the storage system company said Thursday.

EMC, which sells higher-end storage systems and the software used to manage them, warned that weak information technology spending has meant it needs to accelerate cost-cutting efforts. The company has been the target of IBM, Hewlett-Packard, Sun Microsystems and Hitachi Data Systems, rivals that lowered EMC's once-plump profit margins.

"The IT spending environment continues to be brutal," Chief Executive Joe Tucci said in a statement. "In fact, it got even worse at the very end of the quarter. Our third quarter was on track until late September."

For its third quarter 2002, the company expects revenue of about $1.25 billion and a loss of 2 cents per share, not including any special adjustments.

Merrill Lynch analyst Steve Milunovich had expected revenue of $1.39 billion.

In trading Thursday, EMC's shares had increased 13 cents, or 3 percent, to $5.01. But after the post-bell warning, the stock dropped 9 percent from its closing price, to $4.57.

Today's warning will be detailed when the company reports complete results Oct. 17.

The company will lay off about 1,380 people, leaving 17,000 in place, as part of new expense-reduction efforts.

Although EMC has been punished by a spending slump, it hasn't lost its aggressiveness. When HP filed a lawsuit claiming patent infringement, EMC lashed out with a countersuit the same day. And the company hasn't been afraid to cut prices deeply to curtail market-share losses, Milunovich said.