EMC Outlines Plans, Sees No Significant Increase In IT Spending

EMC

"IT budgets are still under intense scrutiny," said Bill Teuber, EMC's executive vice president and CFO. "We see no significant change in current market conditions. We see continued customer caution."

In fact, he said that while IT departments of the past would often over-spend their budgets, they are now under-spending. "New applications are not being deployed," he said.

Still, none of that is a surprise to EMC, which maintained its financial expectations for the second quarter. The current analyst consensus estimate is for EMC to lose 2 cents per share. Teuber predicted EMC will make money by the second half of the year.

Despite the cautious outlook, EMC President and CEO Joe Tucci said he remains optimistic because EMC is focused on high-growth areas and has a "powerful distribution mechanism" and a "really strong product cycle coming up." Executives predicted a host of new products will be unveiled over the next nine months.

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"We're the only company dedicated 100 percent to automated storage solutions," Tucci said.

As for the company's revenue mix, Teuber said EMC aims to drive software revenue to 30 percent of the total by the second half of 2004. Tucci later added that in order to get to that level, EMC will make acquisitions, although he declined to provide further details on acquisitions plans.

As EMC looks to grow its software mix, the company is also seeking to leverage its relationship with Dell. Tucci said EMC will "virtually merge our supply chains" with Dell and that under the agreement EMC will continue to design low-end products but Dell will manufacture them.

"Dell will pay us a fee, or royalty, for our technology," Tucci said. "We'll let them manufacture the low-end products."

Tucci also said channel partners will play a role in improving the company's efficiencies. EMC has been acting on a plan put in place last year to cut costs, including a head-count reduction. EMC peaked with 24,500 employees in May 2001 but will reach its goal of 19,000 by the end of the current quarter, Teuber said. He added that EMC will reach that level by eliminating positions as well as hiring in growth areas.

Investors had little reaction to EMC's meeting, with the company's stock unchanged in Thursday afternoon trading, at $7.18 per share.