EMC suffers Q1 drops in profits, revenue

CEO says the storage company executed its business strategy despite 'very tough economy'

Citing a "very tough economy," EMC Corp. today reported first-quarter earnings that showed a 23% drop in profits and a 9.2% fall in revenue.

EMC CEO Joe Tucci also announced a 5% pay cut for salaried employees in an attempt to keep costs in line with lower demand for the company's products. The pay cut, which won't apply to hourly workers, comes in addition to salary cuts ranging from 5% to 20% that were already taken by EMC's senior management.

First-quarter revenue fell from $3.47 billion to $3.15 billion, while net income plummeted from $251.6 million to $194.1 million compared with the same quarter a year ago. EMC's information infrastructure business revenue, which includes storage, the RSA Security unit, and content management and archiving, totaled $2.7 billion during the first quarter — down $300 million year over year.

Tucci said that even with the dramatic revenue drop, the company executed its business strategy to reduce expenses and grow sales within "a very tough economy." Tucci said he expects IT spending to improve in the second half of the year as companies move along in their restructuring programs and the federal government's economic stimulus package takes effect.

"As we look to the balance of 2009, we believe the global IT spending environment has reached — or is very near — the bottom," he said in a statement released this morning.

One of the few bright spots was EMC's VMware Inc. subsidiary, which showed a 7.4% increase in first-quarter revenue compared with the same period last year, for a total of $470.4 million — although VMware warned of a possible revenue drop in the current quarter as part of its own earnings report yesterday.

Hopkinton, Mass.-based EMC also reported that it has record cash and investments amounting to $9.8 billion.

In January, EMC announced plans to lay off 2,400 employees, or about 7% of its total workforce, which, along with other restructuring moves, is expected to save the company about $500 million annually beginning in 2010.

EMC didn't offer revenue guidance or any other financial outlook today, citing the current uncertain "macroeconomic conditions."

Looking ahead, Tucci said EMC will focus on products that support and promote market strategies, such as the virtual data center and cloud computing. EMC recently announced a new version of its latest high-end Symmetrix array, which moved away from its proprietary, monolithic past with a more modular architecture that is based on Intel's x86 multicore processors and tightly integrated with VMware's APIs, enabling it to more seamlessly support virtual server environments.

Copyright © 2009 IDG Communications, Inc.

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