EMC lays off 1,000, trims overlap

EMC preannounced improved earnings for 2005, but said job cuts will follow in 2006 to eliminate overlap created by numerous acquisitions.

EMC Corp. announced it will lay off 1,000 employees worldwide this year to "rebalance its workforce" after spending almost $4 billion in acquisitions over the past two years. The company's headcount as of October 2005 was 25,200.

EMC also said it will report fourth quarter revenues on Jan. 24 of some $2.7 billion, at the high end of its earlier estimates. Consolidated revenues for the full 2005 fiscal year are expected to be approximately $9.65 billion, an increase of 17% over 2004.

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As part of the revenue announcement, EMC noted that it approved a plan Dec. 30 to eliminate 1,000 positions around the world. The cuts, according to EMC's director of public relation Michael Gallant, will not affect any one department or area, but he did say that the positions will be poured back into the research and development, (R & D) and sales and marketing side of the company.

"The shift will mean more focus on R&D, and sales and marketing in certain areas," he said. "We're trying to target and reach more customers after our acquisitions have let us enter new markets."

Gallant said the job cuts would come on a performance basis, or in areas of redundancy or overlap in duties, "as the company has grown over the years and in some cases from acquisitions."

He added that cuts will come "within the management ranks as well," but did not mention anyone specifically.

"A 5% [reduction in workforce] is worth commenting on," said Dan Renouard, analyst with Robert W Baird & Co. "At first glance, it would appear to be a negative, heading into a seasonally weaker period. However, we view it positively, since probably a big chunk of it is related to Legato and Documentum staff -- they were never integrated, which was the right move initially, but after one and a half years there's probably some fat to cut."

"We also know they've been hiring fairly aggressively in sales and R&D areas for the past few months, which indicates their commentary about 'rebalancing' is probably true, and it's better to have the RIF [reduction in force] done now at the end of the fourth quarter, than at the end of a seasonally weak first quarter."

EMC has spent approximately $4 billion over the last two years on acquisitions, beginning with the $1.3 billion acquisition of backup software maker Legato Systems Inc. in July 2003 and the $1.7 billion acquisition of enterprise content management (ECM) provider Documentum in October 2003. EMC added virtualization maker VMWare for $625 million in July 2004 and another backup software maker, Dantz Development Corp. for $50 million in October 2004.

EMC has been especially aggressive in snapping up startups in the last year, acquiring network systems management software maker Smarts for approximately $260 million in February 2005; network file migration startup Rainfinity Inc. for under $100 million in August; and the intellectual property assets of Maranti Networks Inc., an intelligent switch company, also in August; document imaging software from Captiva Software Corp. for $275 million Oct. 21; and most recently, grid management software from Acxiom Corp. for $30 million Jan. 5.

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