EMC Leans On Channel for Better Revenues in 2002

"EMC is undergoing a transition from a direct sales only to a direct-plus-partners," said Tucci, during an early morning earnings call. "The channel will be our route to geographies and customer segments we couldn't reach as efficiently before.

"When you look at our growth drivers for 2002, you'll see that our focus is on the mark. This is how we intend to shape the industry landscape this year."

The Hopkinton, Mass.-company reported its second consecutive quarterly loss on sales early Thursday, posting a net loss of $70 million, or 3 cents a diluted share, for the fourth quarter that ended Dec. 31. Other areas that Tucci's focused on include consolidation of direct-attached storage to networked storage as well as putting more research into developing storage management software, such as its Auto IS portfolio.

EMC is working on building up its presence in the mid-range market, the one area that has helped rival Compaq Computer maintain better revenues during the economic downturn.

Evidence that EMC is putting more attention on resellers and partners was apparent when it recently announced it was encouraging about 200 of their partners to sign up with distributors Avnet or Arrow North American Computer. By making those resellers work through distributors, it gives EMC more room to build better partnerships with partners such as Dell Computer, Forsythe Technology, Unisys and Kodak.

EMC says it posted a net loss of $70 million, or 3 cents a diluted share, for the fourth quarter that ended Dec. 31, compared with net income of $562.8 million, or 25 cents a diluted share, in the year-ago quarter.

Analysts were looking for EMC to lose 4 cents to 10 cents a share, with a consensus loss estimate of 7 cents a share, according to Thomson Financial/First Call.

Tucci says the company finished 2001 with momentum after a dismal third quarter when the company posted its first net loss in a dozen years. But some analysts worried that EMC had to cut prices sharply in the fourth quarter to remain competitive.

The company's gross margin, as a percentage of revenue was 36.9 percent in the fourth quarter, compared with 59.2 percent in the year-ago period.

EMC's key storage systems revenue tumbled, to $842 million from $1.8 billion in the year-ago quarter. Software sales, which many see as EMC's future, dropped to $352 million from a year-ago level of $483 million.

EMC's total consolidated revenue tumbled to $1.51 billion, down from $2.62 billion in the year-ago period.

But that was better than the revenue expectations of many analysts, says Gary Helmig, an analyst at SoundView Technology.

"I think people would have been disappointed if they would have come in with less than [$1.4 billion in revenue,' Helmig says.

Additional reporting by Reuters