For storage king EMC Corp., the barbarians have crashed the gate. The company, which reported Wednesday a 47% drop in third-quarter revenue, finds itself surrounded by damning market trends.

First, change in the storage market is outpacing EMC's ability to keep up. Executive chairman Mike Ruettgers last quarter admitted he had no idea what his customers would buy anymore. Second, the number of orders still coming in despite the economic slowdown has dwindled since Sept. 11. Finally, competitors are successfully harassing the storage company.

It's toughest adversary, Hitachi Data Systems, is now selling its Lightning products through Sun Microsystems Inc. sales staff. EMC used to sell a lot of storage--some say 25% of its total over the last couple years--into Sun server accounts. But Sun has begun selling the Lightning. And seemingly out of nowhere, LSI Logic Corp. is selling a 40-terabyte E 4600 storage system that in a recent 5-Tbyte configuration undercuts EMC prices by about 75%. EMC's once-envied high margins increasingly look like a distant memory.

In reaction, EMC is laying off around 4,000 people, leaving the company with 19,000 employees. During the third quarter, ended Sept. 30, EMC had revenue of $1.21 billion, 47% lower than the $2.28 billion it brought in during the third quarter last year. Net losses in the same quarter were $945 million, compared with net income of $458 million a year ago. Losses per share in the third quarter were 43 cents, compared with earnings per share of 21 cents last year.

Financial analyst Laura Conigliaro at Goldman Sachs says EMC still could be a strong player again--when money flows once more. In the meantime, she says, it needs to face up to market realities. Says Conigliaro, EMC doesn't have a competitive mid-range product, which is exactly where much of the market is right now.