EMC Revenues, Profit Margin Nosedive
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.