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Uncertain Future Causes EMC to Cut Jobs

EMC is a maker of data storage solutions and is being pressured by an active investor, Elliot Management Corp, to split off their business units. Paul Singer, the leader of Elliot, wants the company to separate out their virtualisation software unit VMware and look to pursue merger opportunities that will maximise their long-term value.

A standoff between company and investor was reached, with the investor agreeing to not agitate the company until September. EMC later announced that they had approved a restructuring plan which would result in a reduction in a workforce, as revealed through a regulatory file in late January.

The filing didn’t detail how many employees would be fired and a spokeswoman for the company refused to detail how local employees in Boston might be affected.

All of this follows a profit forecast that will yield results lower than expected, though VMWare continues to report stable earnings. The company expects it will take a charge of around $130 million to $150 million in the first quarter of the year as a result of the restructuring changes. The company is also expected to buy back up to $3 billion in shares of VMWare Inc, which it currently owns 80 percent of.

Though the company predicted revenue of $26.1 billion and earnings of $1.98 per share for 2015, with the consensus estimate from analysts expecting to see $26.21 billion in revenue and $2.13 earnings per share.

“Buybacks, restructuring, that's all bread ... The meat and potatoes of what investors want to see is major change around the ownership structure with VMware,” said Daniel Ives, FBR Capital Markets analyst.

In a company statement, EMC said that the restructuring will enable them to rebalance and reorganise their workforce in order to align themselves with what awaits ahead, to continue to invest in key growth opportunities and to evolve the company for the future.

Though employees will be being let go, they plan to move these impacted workers to faster-growing areas and eventually close 2015 with more employees than they had at the beginning.

“EMC demonstrated solid performance in the fourth quarter and over the course of 2014. Our strategy is working well despite a challenging and rapidly changing IT environment,” said Joe Tucci, chairman and CEO. “We enter 2015 financially strong and well-positioned to continue capturing greater market share.”

This isn’t the first time EMC has had to cut their workforce. In January of 2014, EMC approached 1,000 existing jobs with a similar plan. A total of 1,004 jobs were cut in May 2013, though the firm eventually gained 2,000 jobs in 2013. A floating workforce may be something necessary for EMC’s survival, though it’s likely to take its toll on employee motivation if their outlook looks shaky.

EMC has over 9,000 employees in Massachusetts alone, with 68,000 worldwide. It has local offices in locations such as Franklin, Marlborough, Milford and Southborough.

Time will tell to see if EMC can recover from this. While their past performance might suggest that they can, it's never a certainty in the ever-changing world of data storage.

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