EMC Corp.,
the Hopkington, Mass.-based maker of computer data-storage systems, had a first-
quarter loss, its third consecutive quarterly shortfall, as
competition with rivals prompted price cuts amid declining sales.
The loss was $76.9 million, or 3 cents a share, compared with
net income of $398.8 million, or 18 cents, in the year-earlier
period, the company said in a statement distributed by Business
Wire. Sales fell 44 percent to $1.30 billion from $2.34 billion.
EMC has boosted efforts to sell more profitable software
products to offset a plunge in hardware profitability as
competitors such as International Business Machines Corp. and
Hitachi Ltd. have slashed prices to try to gain market share.
Costs exceeded sales by $154.6 million last quarter, EMC said.
Shares of the Hopkinton, Massachusetts-based company rose
40 cents, or 3.8 percent, to $10.80 in early trading, according to
Instinet. They had declined 72 percent in the past year.
In related news, EMC Chief Executive Joe Tucci is speaking to Dell Computers as
he tries to stem a collapse in demand and profit margins that has
caused EMC to report its third quarterly loss in a row.
Analysts say Tucci can use Dell’s sales team, buying power and
factory expertise to help battle price cuts by rivals such as
International Business Machines Corp. and Hitachi Data Systems.
“Tucci knows the tide is working against EMC,” said Nitsan
Hargil, an analyst with Friedman, Billings, Ramsey who rates the
stock a “market perform” and doesn’t own the shares. “They are
losing a lot of money. Their competitors are attacking them
ruthlessly on price, on hardware, and they know they have EMC on
the ropes.”
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Software accounted for 22 percent of EMC’s 2001 sales of
$7.1 billion, while hardware contributed 61 percent and services
added 14 percent. The company wants to cut hardware sales to 50
percent of its total and increase software to about 30 percent.
EMC and Austin, Texas-based Dell have said they are exploring
an expansion of their five-year relationship. Dell agreed in
October to resell EMC’s Clariion systems, which cost about $50,000
to $200,000.
Dell’s market clout might be used to get lower prices on
parts for EMC, and some Clariion storage systems might be made at
Dell’s overseas plants, EMC Chairman Michael Ruettgers said in a
March interview. Dell is offering a broader array of storage
devices to sell more servers.
The Dell agreement excludes EMC’s flagship Symmetrix
products, some of which cost several million dollars. Ruettgers
said Dell won’t help make Symmetrix devices.
Takeover Vulnerability
EMC has received “no overtures” from would-be buyers,
Ruettgers said last month. “There’s only a few who would be
interested,” he said.
Hitachi sees value in teaming with other EMC rivals. Hitachi
and IBM announced Tuesday that they will co-develop hardware and
software to enhance data-storage systems. Hitachi already has
storage partnerships with Sun Microsystems Inc. and Hewlett-
Packard Co., among others, which resell its storage devices.
EMC sued Hitachi last week, claiming that the company
infringed on six U.S. software patents. Hitachi sued EMC
yesterday, alleging infringement on eight U.S. patents.
Tucci received a 67 percent salary raise in 2001 to
$1 million for his promotion to CEO. His bonus was cut 42 percent
to $700,000. He held options to buy 4.2 million EMC shares at
strike prices ranging from $11.51 a share to $84 a share. They
can’t be exercised profitably at yesterday’s closing price.
Bloomberg News
