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Technology Stocks : EMC How high can it go? -- Ignore unavailable to you. Want to Upgrade?

To: ratan lal who wrote (13360)	10/20/2001 8:58:28 AM
From: John Carragher	Respond to of 17183

Friday October 19 2:09 PM ET EMC Sales Force Changing Approach to Customers By Tim McLaughlin BOSTON (Reuters) - The hard-charging sales force at EMC Corp. (NYSE:EMC - news), criticized for arrogance and not recognizing market shifts, faces radical changes as the world's top data- storage systems maker calls for a new quota system, fewer luxuries and an attitude adjustment for some. The changes come after EMC's sales force took it on the chin in the third quarter, recording a sharp drop in sales as rivals recognized customers wanted their data-storage in smaller chunks. EMC's sales force missed the shift, pushing its pricey flagship Symmetrix storage machine over smaller, less expensive EMC machines. ``Too consistently they led with Symmetrix,'' EMC Chief Executive Joe Tucci told Reuters. EMC's approach, coupled with the Sept. 11 attacks on the United States, contributed to a dismal quarter. Sales of storage software and hardware systems plunged 54 percent. The shift was a sharp reversal for EMC, where sales of the refrigerator-sized Symmetrix and accompanying software catapulted EMC to the top of the data-storage industry in the 1990s and created a millionaire class within its sales ranks. EMC's former head of global sales, services and marketing, Harold Dixon amassed a fortune of several hundred million dollars, largely from EMC bonuses and stock options. Since leaving the company last year, Dixon has become a key investor in other tech firms, including a smaller storage rival. But the compensation system that enriched Dixon and others has changed. The sales force's compensation now is closely tied to revenue and product mix as EMC moves away from rewarding them for deals with high gross margins. Before, the sale of one Symmetrix machine loaded with several pieces of software could prove more lucrative than selling several products with lower profit margins. EMC's sales force also has monthly quotas now to minimize the company's end-of-quarter revenue push. Tucci wants the company's revenue to be booked more evenly. ARROGANCE IN THE RANKS Tucci also has had to address what he acknowledged to Wall Street analysts as ``pockets of arrogance'' within the ranks. But he disagreed that there is any widespread problem. ``If you look at the surveys, customers clearly love us,'' Tucci told analysts on a conference call. ``They've always said, 'Boy, I wish your prices were a little bit lower.' And guess what, they're getting some of their wish. ``... you want a sales rep that goes for the order, right?'' Tucci continued. ``... I think that EMC arrogance is way over-hyped. I think customer dissatisfaction is just not there.'' He conceded EMC has softened its sales approach, which suggests a recognition that hard-nose tactics at EMC may have sent storage customers into the arms of IBM Corp. (NYSE:IBM - news) and Hitachi Data Systems, a unit of Japanese electronics giant Hitachi Ltd. (6501.T). But he vowed EMC would still field the best. ``While we softened our sales approach, we will still have the most competitive, aggressive and customer-focused selling organization in the world,'' Tucci said. Pacific Growth Equities analyst Thomas Mancino said in a research note that EMC's aggressive pricing and 'attitude' motivated many users to consider alternative products -- when competitors finally got them to market. EMC entered 2001 with a lofty $12 billion revenue target, compared with $8.87 billion in 2000 revenue. The high sales expectations led the company to build up an ambitious cost base that became a major drag on earnings when it was caught off guard by the sharp contraction in data-storage spending. EMC expects to lower its cost base, allowing the firm to break even with only $6 billion in annual revenue. The company does not expect to become profitable again until the second half of next year. The cost cutting is reaching into all corners of EMC's operations, eliminating thousands of jobs, postponing building plans and curtailing travel. Perks and pay for executives also have undergone scrutiny. For example, a vice president who left the company after the cost-cutting began, said country club memberships for executives also were targeted.