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EMC POSTS LOSS, TO CUT ABOUT 1,350 JOBS

Data storage company EMC Corp recently reported a preliminary quarterly loss and revenue that were worse than expected and said it would cut 1,350 jobs due to dismal spending on technology.

Following the news, EMC shares fell 18 percent to $4.45 in after-hours trading.

Hopkinton, Massachussetts-based EMC also said it no longer expected to return to profits for the second half of the year because companies worried about the economic outlook are holding off on technology projects that include EMC's data storage products.

"The IT (information technology) spending environment continues to be brutal. In fact, it got even worse at the very end of the quarter. Our third quarter was on track until late September," EMC Chief Executive Joe Tucci said in a statement.

EMC's weaker-than-expected third quarter comes at a time when bad news for the technology sector is mounting.

Advanced Micro Devices, which makes chips used in personal computers, said its third-quarter sales would fall short. Last month computer services company EDS Corp warned its results would be a fraction of its prior expectations.

Analysts said that technology companies are proving no better at forecasting than investors.

"I don't see how anyone could be surprised if numbers are missed. They didn't get it right when things turned. To think they can call bottoms -- that is just not the way it works," said Marty Shagrin, an analyst at Victory Capital. Victory Capital owned 2.3 million EMC shares as of June 30, according to Thomson Financial Sharewatch.

"They have as difficult a time as we have in trying to figure out what demand looks like," Shagrin said.

EMC reported a preliminary third-quarter loss of 2 cents per share, compared with analyst expectations for a loss of 1 cent per share, according to Thomson First Call. That compares with a loss of 12 cents per share a year earlier.

Analysts had foreseen the company reporting earnings of 2 cents per share in the fourth quarter.

The company reported preliminary revenues of $1.25 billion, also below analyst expectations, which were for revenues of $1.4 billion, according to First Call. That was up from revenue of $1.21 billion a year earlier.

EMC said that it would cut about 1,350 jobs, or about 7 percent of its work force, bringing total employees to about 17,000 by early next year.

One analyst said that EMC's problems could foreshadow problems for other makers of expensive technology.

"It is less of a storage issue and more of an economic issue," said Brent Bracelin, an analyst at Pacific Crest Securities.

In particular, Bracelin said million-dollar-plus software applications or hardware systems are a tough sell right now. EMC's data storage machines competes against those from International Business Machines Corp and Hewlett-Packard Co.

But IBM, a fierce competitor of EMC's in data storage machines, says it is winning market share from EMC.

"IBM is gaining share against EMC and EMC's problems seem to be unique to EMC," Bob Samson, vice president of sales for storage at IBM said through a spokesman.

In July, Tucci said he was comfortable with analyst's third-quarter estimates for EMC, which hadn't changed since, and also committed to profitability. Prior to last quarter, when the company eked out a net gain, EMC had reported three straight quarters of losses.

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 makes high-end data storage machines, but as demand for expensive hardware systems weakened, the company began pushing its less-pricey machines and also restructured to emphasize software development.

EMC shares closed on Thursday on the New York Stock Exchange at $5.01, up 13 cents or 2.7 percent. At $5.01, the stock has fallen 63 percent so far this year, compared with a 44 percent decline in the broader American Stock Exchange Computer Hardware Index.