Storage industry leader EMC is to cut its workforce by 4% through
the dismissal of about 1,100 employees during the next few weeks.
The company described the cuts as its first bona fide
layoffs,
EMC is aiming to boost sales by increasing the number of its sales
and systems-engineering positions, partly through a redeployment of
several hundred workers who currently hold other jobs. In addition,
EMC plans to reduce its use of consultants and contractors, rein in
its travel budget and delay some planned facilities expansion
projects.
The cutbacks come after the company twice reduced its business
forecasts. Last month it warned that its financial results for the
year as a whole would be lower than expected. A week later, EMC
reported first-quarter figures in line with that warning,
disclosing profits of $398.8m (£280m)- up from $332m in the same
period of last year, but about 10% less than analysts had
predicted.
The layoffs will be the second round of job cuts at the company
this year, following the dismissal of several hundred workers in
February. However, EMC officials have described those dismissals as
"performance management cuts" that were part of a stringent and
ongoing employee review process.
About three-quarters of the 1,100 layoffs will occur in North
America, with 300 workers due to go from various groups at EMC's
headquarters in Massachusetts. Most of the remaining job cuts will
be in Europe, the company said. The sackings will leave EMC with
about 23,400 employees, about the same as at the start of the
year.
EMC said the workforce reduction will eliminate "redundancies and
overlaps in certain field operations", reduce the size of several
corporate departments and continue a reduction of the workers
needed to support a "managed decline" of the Unix server business
that the company bought as part of its 1999 acquisition of Data
General.
Tony Prigmore, an analyst at Enterprise Storage Group, described
the layoffs as a sensible response to the disappearance of numerous
dotcom big spenders and the tightening of corporate IT budgets
that's being driven by the weakened economy. "It's another
validation that there's a softening in the storage business," he
said.
But EMC's lower-than-expected results and the company's need to cut
costs do not mean that users are shifting away from its top-dollar
storage devices in favour of ones from rival vendors, Prigmore
added. "The one thing about EMC is you don't have to worry about
them returning to profitability," he said. "They're still
outrageously profitable."
EMC spokesman Mark Fredrickson noted that the company said last
month it would take action on the cost side because of the lowered
business forecast. But EMC continues to predict revenue growth of
20% or more for this year and expects to finish the year with about
1,000 more salespeople and systems engineers than it had in
January, Fredrickson said.
In addition, EMC still plans to spend about $1bn on research and
development while "investing heavily" in its internal IT
infrastructure and looking to hire additional workers in "several
strategic areas"," the company said, adding that its own IT
spending is due to increase by a double-digit figure this year.