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Economic Woes May Slow Storage Spending

Earnings reported by storage vendors in recent days were something of a mixed bag. But none were optimistic about the near-term future. And a wave of research reports and surveys indicate that things are going to get worse before they get better.

The tone was set by industry bellwether EMC Corp. (NYSE: EMC), which reported total revenue for its third quarter of $3.7 billion, up 13 percent from a year ago and in line with the low end of Wall Street expectations. Third-quarter net fell 17 percent to $411.3 million; a year earlier it posted net income of $492.9 million, due in part to selling off a small stake in its VMware unit.

Despite the economic slowdown, EMC chairman and chief executive Joe Tucci said in a statement that "EMC delivered its 21st consecutive quarter of double-digit revenue growth and solid double-digit profit growth." But he cautioned in a conference call with investors that growth in IT spending would be "modest" as some large customers, including Wall Street banks and financial services companies, were scaling back on purchases or delaying deployment plans.

The storage industry leader reduced its forecast for the fourth quarter, anticipating revenue of around $4 billion. Sales of Symmetrix systems were flat, company executives said, while sales of Clariion systems increased.

The problems with the economy and the wild swings in the stock market have hurt consumer and business confidence, prompting a pull back in spending at all levels, some surveys suggest. For large storage vendors, the financial struggles experienced by Wall Street firms -- some of the best customers for sophisticated storage systems -- are bound to result in slowing sales. Other markets are unlikely to pick up the slack.

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