Storage solutions specialist EMC (NYSE:EMC) is tightening its belt after a few gluttonous years. Attached to this morning's generally solid earnings report was an announcement for plans to consolidate the 21 businesses it acquired over the past three years, cutting 1,250 jobs in the process.
The trimming should be done by the end of 2007, and management estimates that it will incur up to $175 million in related restructuring costs. It's not a simple cost-cutting measure, though swelling operational costs certainly justify some of that. The idea is to present customers with "a more unified experience," or in other words, make it easier to interact with EMC as a large supplier of multiple services and systems. Long-term, the thinking goes, that should lead to larger contracts and more loyal customers.
Virtual machine expert VMware will continue to operate as an independent subsidiary, and will go untouched by the decimation going on around it. That segment has its hands full with competition from Microsoft (NASDAQ:MSFT), and it's growing like the dollar weeds in my yard anyway, so it's probably best left to its own devices. But other high-profile acquisitions like RSA Security will be subsumed into the larger structure, losing a few workers along the way.
EMC used to be a simple company to classify: storage solutions, 24/7. The competition was pretty much Hitachi (NYSE:HIT), Hewlett-Packard (NYSE:HPQ), and smaller players like McData (NASDAQ:MCDT), and operations were rather uncomplicated. But the growth opportunities were limited, too. Now, CEO Joe Tucci describes his company as a provider of "the world's best solutions for storing information, protecting and securing information, managing and moving information, and optimizing information infrastructures," and EMC is competing with information handlers like Microsoft, Google (NASDAQ:GOOG), and Adobe Systems (NASDAQ:ADBE).
It's a wide net to cast, and a bold, take-no-prisoners strategy to follow. Tucci sees EMC's greatest competitive advantage in the "unified information infrastructure" it can provide, with everything from disk arrays and storage management software to document management backends and security and authentication services, all under one corporate umbrella.
The stock has largely traded sideways since 2003, but if these strategies play out as planned, EMC could be on the brink of some breathtaking growth. Color me intrigued.
Further Foolishness:
- Get the straight dope on VMware.
- We've been following that string of acquisitions for you.
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Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings , if you like. Foolish disclosure is a complete end-to-end solution.
