EMC Hits New Lows

EMC Corp. (NYSE: EMC) shares hit a 12-month low Wednesday, dropping 4% to $16.30 by 12:30 PM Eastern. The stock slide coincides with a research note by Merrill Lynch & Co. Inc., published today, which details conflict in EMCs salesforce.

As reported on Byte and Switch yesterday, EMC has just lost Michael Ruffolo, head of global sales, and is rumoured to be bleeding sales staff to competitor Hitachi Data Systems (HDS) (see EMC Global Sales Chief Quits).

According to Merrill Lynch, these problems go yet deeper. In his research note, principal analyst Thomas Kraemer writes that EMC has recently fired a sales team in Germany, a manager in France, and 15 sales staff in the Netherlands. “Europe has always been a difficult region and continued turmoil would not surprise us,” he says.

EMC is said to be in the process of reorganizing its sales force, and Merrill expects a “significant” round of layoffs as part of this restructuring.

On top of this, Merrill says veteran hardware engineers are “unhappy” over the direction of the next-generation Symmetrix product, code-named "Spyder." It’s EMC’s "switch-in-a-box" and faces stiff competition from several startups, including Cereva Networks Inc., 3PARdata Inc., and Yotta Yotta. “There could be some senior-level defections,” over this, says Kraemer.Then there’s the Brocade/McData issue, writes Kraemer. It turns out that EMC sales people have begun to promote Brocade Communications Systems Inc. (Nasdaq: BRCD) switches over McData Corp.'s (Nasdaq: MCDT). McData was spun out of EMC about two years ago. The Brocade sales bias is likely to cause some friction between the parent and it’s spinoff, analysts say.

Kraemer concludes that EMC could emerge from this battle to refocus and reorganize as a much more formidable storage fighting force, but the price could be an operating loss in the September quarter.

— Jo Maitland, Senior Editor, Byte and Switch http://www.byteandswitch.com