With Job Cuts, EMC Finally Tries to Offset the Slowdown

The tech-spending slowdown has finally reached the human resources department at EMC (EMC).

The storage systems giant said Tuesday that it will fire about 1,100 workers in an effort to get its cost structure in line with the company's reduced expectations for 2001 sales. The cuts, which represent about 4% of EMC's worldwide workforce, will come from a number of areas: staff picked up with the company's 1999 purchase of Data General; finance and marketing positions at EMC's headquarters in Hopkington, Mass.; and "overlay salespeople," a term the company uses to describe staff specializing in a particular product or industry and working in tandem with other salespeople.

The cost-cutting measures will cause EMC to take a penny-a-share charge against its second-quarter earnings. But they won't eat into research and development, as the company said it's standing by its plans to spend about $1 billion on R&D in 2001.

A spokesman said that several hundred other "overlay salespeople" are being redeployed in quota-based capacities. In other words, their jobs now depend on how much EMC's product they'll be able to sell. Through such redeployment and new hiring, the company expects to increase its legions of quota-based salespeople and systems engineers by about 1,000. (In essence, systems engineers are tech consultants who try to tell customers what their storage needs are.)

The layoffs represent the first in EMC's history, and illustrate just how late EMC came to recognize the slowdown in corporations' spending on tech gear. The job cuts will bring the company's workforce back to the same level at which it stood at the start of the year. That means that EMC was still hiring like gangbusters when companies like Hewlett-Packard (HWP) and Cisco (CSCO) were warning of slowing growth and low visibility early this year. As late as mid-February, EMC Chairman Mike Ruettgers was telling investors that EMC wasn't seeing any slowdown.

Controlling operating expenses has become critical as price competition heats up in a market where many storage companies are chasing fewer sales than they'd anticipated. In the following months, EMC's growth target for 2001 has come down to 20% from 35%. "This is simply adjusting the operating expenses to be in line with the current growth estimate," a spokesman said.

Reeling from a negative Goldman Sachs report, EMC lately was down $3.05, or 8.2%, to $34.05.

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