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EMC SEES RETURN TO PROFITS DESPITE MURKY MARKET

EMC Chief Executive Joe Tucci has said that the data storage company still expects to return to profitability in the fourth quarter, although the information technology market remains "incredibly murky."

"In the second quarter we gave guidance and we're not changing it," Tucci told Reuters ahead of a speech at a Salomon Smith Barney Technology conference here.

"We said profitability in Q4 and profitability for the second half. We also guided that the third quarter would look much like the second, or a penny loss," he said.

Tucci said in July that he did not expect the technology market to improve in 2002, citing tight-fisted customers who are looking for a quick payback from investments. Tucci did not offer any optimism in his speech to investors.

"The IT spending environment is still incredibly murky," he said.

Shares of EMC closed down almost 6 percent, or 40 cents, at $6.36 on the New York Stock Exchange.

Demand for storage hardware sky-rocketed during the technology boom of the 1990s and EMC's earnings soared, but the market dried up as customers decided they had enough storage capacity to meet their data needs. EMC posted three quarters of losses prior to the second quarter, when it eked out a small profit.

Facing low growth in hardware, EMC has turned its strategy for growth toward storage software and is working on software that will automatically manage data stored on EMC machines and those of its competitors.

Tucci said the next-generation of EMC's automated network storage management software would be delivered next month. He also said the company was planning to update and replace all its hardware products within the next six months.

Close To Finalizing Dell Deal

Tucci said EMC was close to finalizing its deal to provide storage hardware to Dell Computer Corp. Under that pact, Tucci said EMC would design a low-end storage product which Dell would then manufacture for itself and sell as an EMC/Dell branded offering.

"Dell doesn't want to do the design, they'll use our technology and their distribution," Tucci said.

Tucci said EMC did not plan to sell versions of the product itself, rather it would receive royalties from Dell for each product sold. He said the move was part of EMC's ongoing push into the low-end of the market, where EMC has not traditionally played.

Tucci said the products would be introduced in the next six months, but refused to be drawn on an exact date. Likewise, the CEO would not give any predictions as to how much EMC thinks it might generate in revenue from the Dell partnership.