Data storage company EMC Corp. said late Wednesday it will lay off 2,400 people to bring down costs despite projecting fourth-quarter results would meet expectations. EMC, the world's largest maker of external disk storage devices, said the restructuring will reduce expenses by $350 million in 2009 and $500 million by 2010 by streamlining back-office operations and cutting layers of management.
The layoffs make up about 7 per cent of EMC's 34,000 employees and will be spread equally among employees in the US and abroad, said EMC spokesman Michael Gallant. Most of the layoffs will be completed by the end of 2009. EMC expects to book an after-tax charge of $200 million, or 10 cents per share, in the fourth quarter related to the layoffs, plus an additional $100 million to $125 million pretax over the next two years.
''We managed our costs and investments very carefully throughout 2008,'' said Joe Tucci, EMC chairman, president and CEO, in a statement. ''However, we believe this additional program will help us strike the right balance between achieving higher levels of efficiency and sustaining strong business agility and performance, without in any way compromising our ability to serve the needs of our customers over the long-term. We are very confident in the competitiveness of our products, services and solutions and the skill and determination of our workforce. Our goal is to position EMC for continued success throughout the downturn and for even greater success during the next economic growth cycle.''
EMC shares rose as investors cheered news that EMC was moving to control costs and that it had met expectations for the quarter, particularly after No. 1 chipmaker Intel Corp had warned earlier on Wednesday that its earnings fell short of already diminished estimates. EMC said it expects to report fourth quarter earnings, excluding a restructuring charge of 10 cents a share, of 23 to 24 cents a share. That would be in line with the 23-cent average forecast of analysts.
Shares of EMC were up 63 cents to $11.81 in after-hours trading. The company's outlook is a rare piece of good news in the sector, as most companies that rely on IT spending have been hit hard by the downturn. EMC has not adjusted its sales or earnings estimates since reporting third-quarter results in October.