EMC 1Q profit sinks 23 pct on charges, weak data-storage spending; sales miss expectations

EMC 1Q profit drops 23 pct, sales miss view

SAN FRANCISCO — EMC Corp.’s first-quarter profit dropped 23 percent on weakness in data-storage spending, which until recently had been fairly resilient to the recession. CEO Joe Tucci predicted that slumping information technology spending “has reached or is very near the bottom” and should rebound in the second half of this year.

The Hopkinton, Mass.-based company’s profit in the opening three months of 2009 still matched Wall Street’s modest forecasts, while sales fell short. It warned that profit margins would be lower this year than they were last year, but didn’t give detailed guidance, blaming the economic uncertainty.

Its shares fell 42 cents, or 3.3 percent, to $12.28 in premarket trading Thursday.

EMC said it earned $194.1 million, or 10 cents per share, in the quarter ended March 31, down from $251.6 million, or 12 cents a share, a year ago.

Subtracting employee stock-based compensation expenses and other charges, profit in the latest quarter was 16 cents per share. That matched the average estimate of analysts polled by Thomson Reuters on that same basis.

Sales eroded 9.2 percent to $3.15 billion from $3.4 billion a year ago and short of the $3.25 billion analysts expected.

EMC’s results come amid rapid consolidation among back-end technology providers, a trend that is rounding out the offerings from rivals like IBM Corp. and Hewlett-Packard Co. and strengthening their posture as one-stop technology shops. Oracle Corp.’s surprise announcement this week of its $7.4 billion deal to buy Sun Microsystems Inc., another EMC competitor, and Cisco Systems Inc.’s recent entry into the server market also illustrate the encroachment on each others’ turf.

Those moves stiffen the competition with EMC, which itself has spent about $8 billion on more than 40 companies over the past six years, and could mean that one day EMC might find itself as a target of another cash-rich rival.

EMC is in a unique position, as the leader in external disk storage systems, with about 23 percent of the market, according to research firm IDC. Though that part of the data storage market is under pressure: IDC says sales of those machines slowed down for the first time in five years at the end of 2008.

When disk storage built into servers and other machines is included, EMC is third worldwide in market share behind HP and IBM.

In a sign that data storage companies have started feeling the pinch of slowing spending, EMC announced plans in January to lay off 2,400 workers, about 7 percent of its global work force. That and other restructuring moves are expected to save the company about $500 million a year starting in 2010.