Peter,
I reluctantly have to agree with your subtle shift of emphasis. The article you posted on the GLW thread (also posted below) suggests it as well. On the one hand, telecom companies need to cut costs by increasing outsourcing, so some growth there as more business is added to the ECM mix. On the other hand, no one's spending money on capacity, so business is taken away. With the benefit of the hindsight that current business conditions give us, the dimensions of the bubble somehow just keeps getting larger and larger.
I can recall back in '98 being angry at the Asian companies for allowing their bubble with cheap credit; how could they do this, I asked, how could they just presume that their constant capacity building could possibly yield anything but--overcapacity and a bust? The shoe, it seems, is now on the other foot, and the chickens come home to roost, relentlessly clucking away.
Our economy, like theirs, has enormous imbalances that seem to me to be growing. The gaps between rich and poor reflect the fact that our ability to produce so-called "goods" far outstrips any possible demand, as workers aren't paid anything even close to what their production capacity is. Overproduction or widespread unemployment must result from this (or both). Somehow we must build a larger middle class, if this story is to have a happy ending. Worldwide, that is, not just in the US. And in the US, IMHO, the trends aren't pretty either--with our regressive payroll and income taxes, and our constant rationalization of ever larger relative salaries (no matter how absurd) for upper managements for doing who knows what (when things are good, they are only too happy to take "credit", while when things are bad, well, its the climate, they can't do anything about it but cut jobs and/or give themselves golden parachutes for all the "risks" and "stress" they took on), the gap will grow larger, the middle class smaller. Or so it appears to me at this early hour in the morning.
No wonder I can't sleep. I am still maintaining a large cash position, albeit in the context of a much shrunken portfolio compared with two years ago.
Let's be careful out there,
Sam
More telecom job cuts expected
Lucent, others need to cut back to reduce revenue costs
MSNBC: CHICAGO, June 14 — Lucent will likely need to cut more jobs to reduce its cost in line with
sliding revenues, and it won’t be alone as other telecommunications equipment makers need to do the
same, several analysts and investors said on Friday.
MURRAY HILL, NEW JERSEY-BASED Lucent, the world’s largest telecom gear maker, on Thursday
blamed weak spending by North American telephone carriers customers in warning its fiscal third-quarter
revenues would fall 10 percent to 15 percent from the second quarter instead of coming in flat as analysts
had expected.
“There’s no doubt that there’s a lot more layoffs coming in the industry because when you add up all the
revenue that’s going to be spent and add up the expectations, they’re out of proportion,” ADC
Telecommunications Inc. Chairman and Chief Executive Richard Roscitt told Reuters earlier this month at
an industry trade show.
“We’ve got some more cost cutting to do,” he added. “We know it.”
The telecommunications industry cut almost 318,000 jobs last year and eliminated an additional 135,000
positions in the first five months of 2002, both leading totals among all industries, according to
outplacement firm Challenger, Gray & Christmas.
WorldCom Inc. said Friday at its annual shareholders meeting it will cut its work force, along with selling
or closing facilities and real estate to pare its $30 billion debt. The telephone company did not say how
many jobs would be eliminated, but analysts expect it could be as many as 16,000, or 20 percent of the
total work force.
WorldCom chief sees growth
“WHO’S SPENDING?”
With such telephone companies as Sprint and Qwest Communications slicing billions of dollars from
their spending budgets, battered equipment makers will need to cut costs, analysts and investors said.
“It gets to be pretty substantial after a while. A billion here, a billion there, and all of a sudden you’re
saying, “Who’s spending a lot of money?”’ said Henry Asher, president of the Northstar Group, a New
York money manager that owns Lucent shares.
Several analysts and investors believe Lucent will be forced to join ADC and others in further cuts,
possibly more than 5,000 below its current targeted employment level of around 50,000. Lucent employed
106,000 in January 2001, when it launched its restructuring and 56,000 at the end of March.
A Lucent spokeswoman said the company remains on track to reach the 50,000-job level, but that the
market continues to evolve and the company will “make adjustments as needed.”
INDUSTRY GROWTH NOT LIKELY SOON
The weak telecom market will force Lucent to cut its work force closer to the 42,000-person level its
Canadian rival Nortel Networks Corp. has targeted, one analyst said.
“Lucent will need to have a head count very similar to where Nortel’s target range is, certainly below
45,000,” independent analyst Tom Lauria said.
“The industry is not showing the signs of recovery that we were all hoping for and unless things change
significantly we won’t see growth until late 2003, into 2004,” he added.
Lauria said the one saving grace for the industry could be if the U.S. government gets involved in setting
and providing incentives for the roll-out of a national high-speed Internet, or broadband, policy.
However, Lehman Brothers analyst Steve Levy said Lucent will be reluctant to continue slashing jobs, and
may instead squeeze suppliers further while benefiting from the savings of its previous move to shift
manufacturing to outside companies.
“They are getting to the point where they are extremely reluctant to do major reorganizations or even
significant reorganizations that result in big head count reductions,” he said.
Minneapolis-based ADC said in May it expects to return to profitability in fiscal 2003 by cutting more
jobs and reducing factory costs further, resulting in additional restructuring charges in the second half of its
fiscal year.
It employed 10,000 at end of the second quarter and said in a quarterly filing with the U.S. Securities and
Exchange Commission on Friday that an undetermined additional number of jobs more will be cut
throughout the rest of fiscal 2002.
J.P. Morgan H&Q analyst Jeff Lipton said in a research note that supplier Tellabs Inc. still needs to cut
costs and that is likely to entail more job cuts, but he said they are not unique.
“It’s not just Tellabs, it’s also Ciena ( Corp.), Juniper (Enterprises Inc.); some more than others, but
almost everybody,” he said. |
