EMC cuts business outlook for a second time

Storage market leader EMC Corp. today reduced its business outlook for the second time in two months, warning that financial results for the first quarter and the year as a whole will likely be below expectations.

Hopkinton, Mass.-based EMC said first-quarter earnings are now expected to come in at about $394 million, which would be 10% lower than the consensus estimate that financial analysts had made based on previous guidance from the company. Revenue for the quarter should be up about 29% compared with the same period last year, EMC added.

For all of this year, though, EMC is now predicting revenue growth of approximately 20% due to cutbacks in IT spending driven by the softening economy. That's down from a growth prediction of 25% to 35% announced by the company in February, when its outlook for the year was first lowered.

Bill Teuber, EMC's chief financial officer, said in a statement today that the storage vendor is forecasting only a modest increase in annual earnings because of the spending slowdown by users. The company "is focusing on opportunities for cost reduction" but will continue to invest in areas such as research and development, customer service and sales, he said.

First-quarter revenue "ended up softer than anticipated because of some purchase hesitation from our customers," said Joe Tucci, EMC's president and CEO. "We found some customers reluctant to spend budgeted IT money, given the abundance of negative economic news."

Tightened spending was seen in both the U.S. and Europe, according to EMC, which projected total revenue of about $2.3 billion for the quarter. Noting that the amount of data that companies need to store continues to increase, Tucci said EMC is trying to show users "how we can help them through challenging budget constraints."

EMC dismissed several hundred workers in February, but the company said at the time that the reductions weren't an indication that it was looking to cut internal costs. Instead, EMC said, the move was part of a stringent review process in which department heads regularly assess the skills and performance of employees.

In a separate matter, EMC today said it has acquired a Brussels-based developer of storage software in a cash deal valued at less than $50 million. The purchase of FilePool NV is the sixth software-related acquisition that EMC has made in the past 15 months as it tries to reduce its reliance on sales of storage devices.

This story, "EMC cuts business outlook for a second time" was originally published by Computerworld.

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