A bad day for tech: 31,000 jobs slashed
Several companies announce layoffs - Companies that have made recent cuts
Hewlett-Packard cutting 6,000 more jobs
July 26, 2001
CNET cutting 15% of workforce
July 25, 2001
By Karen Kaplan / LA Times Staff Writer
Published July 27, 2001
A host of beleaguered technology companies announced a staggering
31,000 worldwide job cuts on Thursday, marking one of the worst
days for layoffs since the tech bubble burst a year ago.
Thursday's moves from a variety of tech titans, which already
are slogging through the worst year in the industry's history,
caused analysts to wonder whether the carnage would get even
worse and when it would come to an end.
"I don't think anybody has the faintest idea," said Richard Shaffer,
principal with Technologic Partners in New York. "My guess is the
CEOs who are doing it are clueless. When sales start to tank,
they don't know what else to do."
More than 300,000 tech jobs, nearly 40% of the U.S. total, have
been eliminated in the first half of this year, according to
Challenger, Gray & Christmas, a Chicago outplacement firm.
Along the way, the tech industry has fallen from its position
as the U.S. economy's hero to being its Achilles' heel. New orders
for equipment such as personal computers and other gadgets have
shrunk at their fastest pace ever--49.2% on an annualized basis--
in the last year, according Moody's Investors Service Inc.
"When times get tough, people don't buy the new car, they don't
buy the new PC, and they don't buy the new Palm," Shaffer said.
Business spending is off just as sharply.
Telecommunications companies, which are drowning in a surplus
of equipment amid plummeting demand, reported the deepest cuts Thursday.
French telecom equipment maker Alcatel said it will shed more
than 10,000 jobs in addition to the 5,800 cuts announced earlier
this year. San Jose-based JDS Uniphase, which makes fiber-optic
components, added 7,000 workers to its previous tally of 9,000
layoff victims. And Silicon Valley bellwether Hewlett-Packard
announced 6,000 layoffs as it warned that its revenue will be well
below Wall Street's expectations because of plunging consumer sales.
A few smaller companies, including German chip maker Infineon
Technologies, New Jersey communications software maker Avaya Inc.,
El Segundo-based International Rectifier and data storage device
maker Quantum Corp. of Milpitas, Calif., announced additional
cuts totaling 8,000 jobs.
The tally from tech companies on Thursday alone exceeds by nearly
one-third the 24,356 U.S. layoffs announced by companies during
all of last week, according to International Strategy & Investment
Group, or ISI, in New York.
Even mighty Microsoft said Thursday that it will add fewer than
4,000 jobs between now and June--half as many as it added in the
previous year.
Weekly U.S. layoff announcements peaked in late April at 60,954
and have trended sharply lower since then, averaging a relatively
meager 23,762 cuts in the last four weeks, according to ISI.
But now some industry experts are predicting that trend will reverse.
The news from Hewlett-Packard, in particular, spooked Fred Hickey,
editor of the High Tech Strategist newsletter in Nashua, N.H.
If HP is ready to cut 6.5% of its work force, he said, other
companies may soon follow suit.
"They all believed there would be a second-half rebound, so they
were slow to lay people off," Hickey said. Now that it's clear
that the business climate isn't likely to improve until next year,
they could follow with more job cuts."
There are about 130 million jobs left in the U.S. economy. Nationwide,
the jobless rate stands at 4.5%, still low by historical standards.
"I don't believe 4.5% unemployment is going to be the low for the
cycle," said Hickey, who expects the bad news to keep dragging
out over the next several quarters at least.
But layoffs tend to be a lagging indicator. By the time they are
announced, companies typically have experienced the worst in the
previous three months or so.
Michael Reynnells, associate managing director at ISI, said he expects
the layoffs to keep coming, though not necessarily at the levels seen
in the spring.
"The company news is pretty bleak, and that doesn't really foreshadow
any great improvement in layoff announcements," Reynnells said.
"As long as companies are under this kind of pressure, there's
always going to be that looming layoff announcement. Maybe the worst
is over, but it doesn't preclude more of these things."
The layoffs are hitting especially hard at telecommunications
equipment firms, which saw record sales volumes abruptly disappear
as the Internet economy soured, pushing smaller phone companies
and other customers into bankruptcy.
Until the dot-com boom went bust, nearly every start-up with
funding was buying communications hardware to handle corporate
data, Internet traffic and e-commerce transactions. Phone companies
joined the buying spree, adding more hardware and high-capacity
lines to handle the rocketing data traffic.
When the high-tech fortunes collapsed, equipment makers were
unprepared for the sudden reversal. The ripple effect has extended
beyond the equipment companies to their parts suppliers, hitting
hard at chip makers and fiber suppliers alike.
The financial crunch was made worse at equipment maker Lucent
Technologies and others because they had provided billions of dollars
in equipment loans to firms that ultimately failed. Lucent has
responded in breathtaking fashion.
After announcing 19,000 layoffs earlier this year, the company
said Tuesday that it would slash its work force by an additional
15,000 to 20,000 workers. Lucent also eliminated 17,000 positions
by spinning off its semiconductor and optical components division
into a separate company. When the cuts are done, Lucent will be
left with 57,000 employees, less than half the 123,000 workers
who began the year with the company.
Just like the corner coffee shop, tech giants that can't sell their
products can't afford to pay their workers. With consumers holding
onto their old PCs, Gateway, Compaq Computer and Dell Computer
have announced the elimination of 11,500 jobs since January.
Times staff writers Elizabeth Douglass and Walter Hamilton
and researcher Nona Yates contributed to this report. |
