EMC Revenues, Profit Margin Nosedive

By Chris Preimesberger  |  Posted 2009-04-23 Print this article Print

EMC's CEO asks employees to take 5 percent pay cuts to avoid more layoffs and save $100 million in Q2. The company reported revenue of $3.15 billion, down 22 percent from the record $4.02 billion it banked in Q4 2008 and 9 percent from a year ago. In addition, its profit margin plummeted 23 percent, company officials said.

EMC's revenue and profit margin took major hits in the first quarter of 2009, the storage giant reported April 23 in its first-quarter 2009 earnings call.

The company reported revenue of $3.15 billion, down 22 percent from the record $4.02 billion it banked in the fourth quarter of 2008 and 9 percent from a year ago. In addition, its profit margin nosedived by 23 percent, company officials said.

As a result, President and CEO Joe Tucci said that he has asked EMC's employees to join company management in taking a temporary 5 percent pay cut.

"This, and other actions, will keep us at maximum strength and will help avoid a repeat of the firm's January job cuts," Tucci said on a conference call.

On Jan. 7, EMC announced that it would trim about 2,400 full-time jobs, or about 6 percent of the staff, in light of the recession. However, Tucci said that it was likely no more layoffs would be necessary this year after the pay cuts are instituted.

CFO Dave Goulden said that the near-term cost reductions will save EMC an additional $100 million in 2009.

Tucci said that EMC customers have been delaying capital spending due to the recession, and when budgets were finalized for 2009, more stringent spending policies resulted. Overall demand seemed to improve in March, Tucci said, but he also said he expects the market to remain depressed through the second quarter.

There is a bright side, Tucci said, adding that he believes the spending slowdown is near its low point.

"As we look to the balance of 2009, we believe the global IT spending environment has reached, or is very near, the bottom," Tucci said.

"We expect IT spending to improve in the second half of 2009 as customers will have better budget visibility, be further through their own restructuring programs,  and broader stimulus packages should be under way."

EMC generated operating cash flow of $864 million and free cash flow of $681 million, all contributing to record cash and investments of $9.8 billion.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on Salesforce.com and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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