The slide goes on for EMC. For its second quarter of 2002, the high-end storage systems and software giant reported revenues of $1.39 billion, a 31% fall on the same quarter a year ago. While storage hardware sales are shrinking for most of the sector's vendors, EMC is also losing market share to rivals IBM and Hitachi Data Systems, according to analyst IDC, and is having to reduce prices dramatically to in order to compete.

EMC's software revenues also fell by 36% to $0.3 billion quarter-on-quarter, but were up 14% sequentially. This is despite the fact that EMC is spending around 70% of its 2002 research and development budget on its software portfolio, according to company executives.

In the market for network attached storage, things are a bit brighter. EMC is enjoying strong sales of its Celerra File Server product. For the first time in 2001, EMC became the leading NAS vendor, overtaking Network Appliance, according to analyst Gartner.