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EMC 3Q profit falls, plans job cuts

Quoting chron.com

EMC Corp. on Tuesday said its third-quarter profit fell by about a third, and the provider of data-storage hardware and services announced plans to cut 1,250 jobs, or 4 percent of its work force, by the end of next year after $7 billion in recent acquisitions.

Hopkinton-based EMC said net income for the July-September period was $283.7 million, or 13 cents per share. That compared with a profit of $422 million, or 17 cents per share, a year ago.

Revenue rose 19 percent to $2.82 billion from $2.37 billion a year ago.

The year-to-year profit comparison was clouded by the effects of a $106 million tax-related benefit that EMC enjoyed in the year-ago quarter. And revenue was boosted $37.8 million in the most recent quarter due to EMC's acquisitions last month of a pair of Massachusetts-based information security firms, RSA Security and Network Intelligence, for a total of nearly $2.3 billion.

Those were the most recent of 21 acquisitions EMC has made in the past three years at a cost of $7 billion to diversify beyond storage hardware and move into faster-growing data storage software and services.

EMC said it would cut about 1,250 jobs worldwide by the end of next year from its work force of about 31,000 _ the figure is up from 25,200 a year ago because of recent acquisitions _ although the reductions will not affect its VMWare subsidiary, a fast-growing producer of software for computer servers.

EMC will record a pretax charge of $150 million to $175 million in this year's fourth quarter to cover the upfront cost of the job cuts.

"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, centralized corporate functions, reduce management layers, and take greater advantage of opportunities to improve our overall cost structure," said Joe Tucci, EMC's chairman, president and CEO.

Next year's cuts are in addition to a 1,000-job reduction taking place at EMC this year. That move, announced in January, is designed to eliminate redundant functions and emphasize high-growth areas of the company.

Despite the cuts, EMC expects to finish 2007 with more employees than it will have at the end of this year as it adds workers from acquired companies.

EMC has now delivered 13 straight quarters of double-digit revenue growth, and revenue in the most recent quarter was the highest in the company's 27-year history. But EMC's stock price has remained largely flat as the company has sought to expand beyond storage hardware into more profitable services and software.

Its shares fell 13 cents to $12.70 in premarket trading.

Nevertheless, Tucci said EMC is growing rapidly.

"We continue to grow significantly faster than the markets we serve, and we are clearly gaining a larger share of our growing worldwide market opportunity," Tucci said.

EMC's systems are used by banks, airlines, Internet service providers, retailers, governments and others to store massive amounts of data. Rivals include IBM, Hewlett-Packard, Hitachi and Network Appliance.

Despite the recent surge in acquisitions and $2.2 billion in recent borrowing to buy RSA Security, Tucci said EMC completed the third quarter with $5.5 billion in cash and investments, and the company remains on track to buy back at least $3 billion worth of its shares by year's end.

EMC expects a fourth-quarter profit of 9 cents per share, including a charge of 6 cents a share from the job cuts announced Tuesday and a penny-a-share expense related to the recent acquisitions.

Excluding those charges, EMC expects a profit of 16 cents per share _ in line with the consensus estimate of analysts surveyed by Thomson Financial.

Read the original, here.

Published Tuesday, October 17, 2006 7:00 AM by David Marshall
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