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With little growth in sight, EMC plans layoffs

EMC’s earnings report Wednesday served as another reminder that storage spending is not growing at anywhere near the rate that data is. With more data spread around on mobile devices and the cloud, the storage model is changing and companies are not rushing out to buy more traditional storage arrays.

EMC’s $6.68 billion revenue last quarter was a big jump from its $5.54 billion in its disappointing third quarter. But EMC’s full year storage revenue of $23.22 billion fell short of the vendor’s original target of $24.5 billion, and its 2014 forecast of $24.5 billion was below Wall Street expectation. EMC executives said industry-wide storage revenue growth continues to slow, and the company announced it will reduce its staff by about 1,000 to cut costs.

The slowdown is clearly more industry-related than specific to EMC. Worldwide storage sales have been down overall this year, and IBM said its storage revenue dropped 13% year-over-year during its earnings call earlier this month.

“We are disappointed we didn’t hit our original goal of $23.5 billion in revenue,” EMC CEO Joe Tucci said, “We are, however, proud that we did hit our $5.5 billion free cash flow goal, grew considerably faster in the markets we serve, and substantially faster than the overall IT market.”

Tucci added that the transition in the IT business now presents “the biggest, most disruptive and yet most opportunistic transition in IT’s 60-plus year history.” However, he and EMC Information Infrastructure CEO Dave Goulden mentioned several times that CIOs are reluctant to buy in this market “We recognize that CIOs right now are being very cautious in their spend,” Goulden said. “We are seeing a little bit of a pause in the market … We are really factoring what we are seeing in the market and the dilemma that the CIOs are facing into our thoughts about how the year might play out. So we are taking a conservative view of IT spending.”

Tucci added that EMC expects the IT market to grow around only 2% this year, and EMC’s guidance represents a 3% gain over 2013.

As for the layoff, Goulden called it a “rebalancing activity” to put EMC’s workforce more in line with the current technology and product landscape. EMC had a similar layoff last May. The company has about 60,000 employees.

“Last year when we did this, we actually wound up with about 2,000 more people at the end of the year when we started off this,” he said. “This year we expect to probably end the year flat or slightly up. Just think of it as rebalancing rather than restructuring.”