EMC ends jobs cull

12 May 2003

BOSTON: Storage giant EMC, which employs 1,200 people at its manufacturing and assembly facility in Ovens, Co Cork, has drawn a line under the large-scale job cutting programme, which has seen its global headcount reduce by more than a quarter in the past year.

Speaking to journalists at the company’s headquarters in Hopkinton, Massachusetts on Friday, president and CEO Joe Tucci said: “We’ve reduced staff numbers from 24,500 to 17,000 but it’s not my belief that we’ll do any more big layoffs. There will always be some changes in the employment profile but there are no major layoffs planned.”

The jobs cuts have, he said, helped EMC take US$1.3bn in cost out of the business and move back into the black in the last quarter. Tucci added that leaner production methods and keener pricing from key suppliers had also contributed to the cost savings.

EMC, the world’s largest dedicated storage vendor, is seen as a bellwether for an industry that saw revenue dip an unprecented 15pc last year. The company’s strong first quarter results announced last month have led many to believe that the worst may be over for the beleaguered sector. After two years of contraction, the industry looks likely to resume growth, albeit in the low single digits, during the remainder of the year. EMC will be hoping to grow faster than this but to do so it will need to take market share from rivals such as IBM, HP and Hitachi Data Systems, all of which have been aggressively marketing new storage products in recent months.

To re-position itself for growth, EMC has, under Tucci’s guiding hand, made a number of fundamental changes to the way the business operates in the last year. First, having exclusively served the high-end market with machines costing upwards of US$2.5m, the company is now aggressively targeting mid-range and low-end segments of the market with boxes that start at about US$25k. According to Tucci, EMC’s Clariion range, which is aimed at these segments, earned revenues of US$220m in the last quarter, which equated upwards of 20pc of EMC’s total revenues for the period.

The second big change is that EMC, having been a direct sales-only vendor, has opened up a new indirect channel through the appointment of a resellers such as Dell and Fujitsu-Siemens. The Dell deal is particularly significant in that it allows the world’s largest PC company to cross-sell EMC Clariion and the high-end Symmetrix systems to its customer base. Tucci revealed that the Dell channel accounted for about a third of Clariion sales in the last quarter.

The final element of the EMC re-jig was its acquisition of nine promising software firms in order to drive its strategy of boosting revenues from software as opposed to hardware. EMC has spent US$300m on these firms although many of which had minimal revenues, noted Tucci. “When we bought Data General [in 1999] it had US$1bn in revenues as well as great technology. These smaller firms have great technology and that’s it.”

A bullish Tucci concluded by saying that the company was in a uniquely strong position to benefit from a return to growth in the market. “We have nearly US$6bn in cash, no debt and a market capitalisation of US$22bn. We’ve just got to be best of breed in the segment and offer customers exactly what they want.”

Earlier, David Goulden, executive vice-president for business development and marketing, came close to admitting that EMC had come close to pricing itself out of the market. “Two years ago, we were perceived as too expensive and I won’t hide the fact that we charged a significant premium for our products but now we price our products ‘at market’ which means we take account of competitors’ pricing.”

By Brian Skelly