EMC: 3Q Revenue Flat, 4Q Expected To Be Flat Also

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EMC executives on Thursday reported financial results for the third quarter and said they expect fourth-quarter revenue to be flat compared with the typical year-end sales spike experienced in the past.

While EMC did not break out sales for the channel vs. direct sales, the company has programs in place to increase its channel capabilities, said Gregg Ambulos, vice president of global channels at EMC.

During the third quarter, about 1,200 of EMC's North American channel partners attended the company's new accreditation program under which they receive the same training as internal EMC people on sales and services, Ambulos said. The majority were from solution providers and distributors, with a smaller number from server vendor partners such as Dell Computer, he said.

EMC is also looking to roll out programs over the next six to nine months to increase the self-sufficiency and autonomy of its solution providers, said Ambulos. "Partners are going to play a bigger role at EMC going forward," he said.

The new CX-series of Clariion arrays introduced this year are providing new opportunities for solution providers, Ambulos said. Partners now have a product that scales in the midrange market and is software-compatible with the company's Symmetrix line. "If I were a partner, I would look at this and say, 'Wow, I want to partner,' " he said.

Revenue for EMC's third quarter, which ended Sept. 30, was $1.26 billion, up about 4 percent from the $1.21 billion reported for the same quarter last year, but down 9 percent compared with the second quarter of 2002.

The company had income of $21 million, or 1 cent per share, for the quarter. However, that figure includes $73 million in after-tax benefits which, if excluded, gives the company a loss of $51 million, or 2 cents per share. For the same quarter last year, the company lost $945 million.

Bill Teuber, EMC's executive vice president and CFO, told CRN after the conference call on Thursday that, going into the third quarter, the company had expected revenue to be flat with that of the second quarter, with fourth-quarter revenue expected to rise based on historical trends.

The reality has turned out to be different.

By the end of the third quarter, customers were pushing purchases, regardless of whether from EMC or its competitors, out to the fourth quarter and beyond, except for those that show an immediate return on investment, Teuber said.

"Because of what we are seeing from our customers and analysts, people are saying they won't spend more in [the fourth quarter," he said. "Today, folks are underspending their budgets. In 1998 and 1999, CIOs were told to spend whatever it takes to get ready for 2000. Then the dot-com boom came, so CIOs got checks to spend for e-business. Now they're underspending their budgets and returning dollars to the corporate coffers. That's how they get to be corporate heroes today."

EMC expects next year's spending to stay about the same as this year's, said Teuber.

Even without increasing revenue, EMC should be heading toward profitability going forward, said Teuber. The company has cut its break-even point to about $1.4 billion in revenue, compared with $1.8 billion in the past, he said. Inventory turns are down and cash on hand and market share are up compared with earlier in the year, he said.

EMC executives early this month said the company plans to lay off an additional 7 percent of its workforce, bringing its head count to about 17,000 by early next year. Teuber said that includes about 2 percent of the company's services personnel, 3 percent of R and D personnel, 12 percent from other departments, but no cuts in the direct-sales force.

Joe Tucci, EMC's president and CEO, said that on Oct. 28 the company will introduce its newest member of the Clariion family, and will bring Kevin Rollins, president of Dell, on stage to discuss the one-year anniversary of the Dell-EMC partnership.

EMC will also introduce the latest version of its Symmetrix arrays soon, Tucci said. He would not discuss details but said that some systems are already undergoing trials at customer sites. He also said it was nice to come out with the new Symmetrix after rivals Hitachi Data Systems and IBM made their product introductions. "We know what our competitors have to offer, and I'm extremely confident," he said.

On the software side, Tucci said all EMC software will be 100 percent CIM (Common Information Model)- and Bluefin-compliant going forward. CIM and Bluefin are standards that allow storage management software to manage multivendor storage hardware.

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