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EMC plans 1,000 job cuts; charge to cut profits

EMC Corp., which makes computer disks used for data storage, said Friday it is cutting 1,000 jobs and that a series of charges would eat into its expected net income for the fourth quarter.
/ Source: The Associated Press

EMC Corp. said Friday it plans to eliminate 1,000 positions but added that it will see a net gain in total employment by year’s end as the company moves to emphasize data services and software amid pressure to cut costs in the data storage hardware business.

EMC announced the cuts affecting about 4 percent of its work force as it raised its fourth-quarter revenue estimate. The company also said a total $269 million in charges from the job moves and other expenses will reduce its quarterly and full-year 2005 earnings, to be announced Jan. 24.

EMC said it plans to eliminate redundant functions and emphasize high-growth business areas after recent acquisitions.

Although Hopkinton-based EMC has delivered nine straight quarters of double-digit revenue growth and expects to see a 10th from last year’s fourth quarter, the company’s stock price has remained flat as storage hardware has become an increasingly lower-cost commodity.

In response, EMC has recently bought data services and software companies, including deals for VMware, Dantz, Documentum, Legato, Rainfinity and a $275 million deal to buy Captiva Software Corp. that closed Dec. 30.

More diversified rivals in the data storage niche also have ordered recent cuts, including 14,500 job reductions announced last summer at Hewlett-Packard Co. and a similar number posted last spring by International Business Machines Corp., primarily affecting jobs in Europe.

While reasons for cuts vary from company to company, all face increasing pressures to reduce costs, said Mark Stahlman, an analyst at Caris & Co.

“This is what all of the major IT (information technology) suppliers have been going through,” said “There’s a geographic shift in jobs to Asia going on, and there’s also a shift among the various product lines.

“These are increasingly lean companies that are organized to deliver returns to investors. I think EMC is doing the right thing.”

EMC’s systems are used by banks, airlines, Internet service providers, retailers, governments and others to store massive amounts of data.

EMC said it will record an $80 million charge from employee separation benefit costs, and will take two other fourth-quarter charges: $175 million from tax expenses tied to its repatriation of $3 billion in overseas earnings, and $14 million from its acquisition of Captiva.

EMC expects fourth-quarter revenue ranging from $2.70 billion to $2.71 billion, up from its previous forecast of $2.67 billion to $2.69 billion.

Including the $269 million in charges, EMC expects to report fourth quarter net income of 6 cents per share, compared with 13 cents per share in the same quarter a year ago. Excluding the charges, EMC expects to earn 17 cents per share, at the high end of its previously expected range of 16 cents to 17 cents per share.

Analysts surveyed by Thomson Financial expect a per-share profit of 17 cents, excluding charges, on $2.69 billion in sales.

EMC said the work force plan “will result in increased focus on new product development and the company’s ability to target, reach and support more customers around the globe.”

EMC spokesman Greg Eden said job cuts will be spread across geographic areas and business units. He declined to elaborate.

The company expects to have more employees by the end of 2006 that it does now. Eden declined to offer specific numbers, saying more details would be released Jan. 24.

At the end of last year’s third quarter, the company had 25,200 employees — figures that do not include 400 workers EMC gained through the Captiva acquisition.

The cuts, Eden said, “will be done through normal attrition and performance management, by identifying overlapping and redundant efforts, and ensuring we have the right skill sets to align with our business priorities and our market opportunities.”