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EMC banks on software, services

EMC tells analysts don't worry, be happy. They got a plan.

BOSTON -- EMC Corp.'s top brass gathered at the World Trade Center this week to tell a group of more than 400 industry and financial analysts that they have a strategy to weather the stormy economy.

The company said it would lower prices, tighten expenses and make big investments in services and software in order to grow its profits and get back on track after two consecutive earnings misses.

EMC's president and CEO, Joe Tucci said the company would put 75% of its research and development budget -- roughly $750 million -- into developing its automation software and growing its services organization.

EMC is eyeing a business model with about 30% of its revenue coming from software and approximately 20% from services in 2003. During the most recent quarter, software and services represented 25% and 11%, respectively, of EMC's total revenue.

Tucci said that a poor economy brings with it heavier competition and a decline in profit margins, but maintains that once the economy stabilizes EMC will increase its lead in the data storage market.

"It's an inescapable truth that it's tough out there," said Tucci. "We have a plan B in our pocket if things get worse and we enter into a deep global recession."

While Tucci did not elaborate on what "Plan B" was, EMC has already evidenced that it will not hesitate to tighten its belt. The company cut more than 1,100 jobs in June.

But at an event geared toward assuring the analyst community that the company will rebound from the economic downturn, EMC would not give any future financial guidance.

EMC's second quarter earnings fell 71% to $109 million from the previous year.

Steve Duplessie, founder and senior analyst for the Milford, Mass.-based Enterprise Storage Group, said that though it is hard to effectively make the move to software, EMC has proven that they can execute on a strategy.

Let us know what you think about the story, e-mail Kevin Komiega, assistant news editor

For more information:

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EMC Corp. to eliminate 1,100 jobs, or 4% of company's workforce

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