Many financial savants grabbed their crystal balls and went into hiding when the economy went into freefall. Now that there are signs of recovery, they are again gazing into their crystal balls with renewed hope. According to many of them, including IMF’s chief economist Olivier Blanchard, the recession is behind us.
Tech honchos now believe that the IT industry would lead the recovery. According to a survey conducted by KPMG, two thirds of the 130 CEOs that were surveyed believe the IT industry would recover quicker than the US economy. Furthermore, a vast majority of CEOs feel 2010 would bring glad tidings for their industry. One can expect lesser job cuts in the near future as more than two thirds of tech bosses are not too keen on cost cutting.
Verizon on Monday said it plans to cut more than 8,000 employee and contractor jobs before the end of the year in the wireline business, which it hopes will speed up efforts to keep costs in line, according to chief financial officer John Killian. But unlike in recent years, the company has no plans of offsetting the wireline layoffs with hiring in its wireless business.
"We probably will not have large-scale hiring until we're out of the recession," said Denny Strigl, Verizon's Chief Operating Officer.
The news comes after the nation's largest wireless carrier reported a 21 percent drop in second-quarter profit, although the company's earnings did creep slightly higher than Wall Street expectations. Verizon earned $1.48 billion, or 52 cents per share, in the three months ended June 30, down from $1.88 billion, or 66 cents per share, a year ago.
Revenue rose 11 percent to $26.86 billion from $24.1 billion a year ago, which is what Wall Street had expected. Much of that increase can be attributed to the purchase of Alltel in January, otherwise revenue would have only increased 1.9 percent.
Casting somewhat of a somber cloud over the official availability of Windows 7 RC to the general public today, at the same time, Microsoft has laid off 3,000 people. This marks the second round of job cuts as part of the 5,000 planned pink slips the software maker announced back in January, and that number could increase before it's all over.
"As we move forward, we will continue to closely monitor the impact of the economic downturn on the company and if necessary, take further actions on our cost structure including additional job eliminations," Chief Executive Steve Ballmer wrote in an email to all Microsoft employees this morning.
It's unclear how many of those cuts will be made locally, however half of the layoffs will take place in the US and the other half internationally, The Seattle Times reports.
Slumping demand continues to take its toll on the memory chip industry. Micron, the largest U.S. maker of memory chips, said earlier this week that it has been particularly affected by decreased demand for specialty DRAM products, and as a result it plans to phase out 200mm wafer manufacturing operations in its Boise, Idaho facility.
"This action will reduce employment at Micron's Idaho sites by approximately 500 employees in the near term and as many as 2,000 positions by the end of the company's fiscal year," Micron said in a statement. "The company has sufficient manufacturing capacity remaining and does not expect any disruption in product supply required for customer needs."
Micron went on to say that these latest job cuts were not anticipated and not part of the 15 percent global workforce reduction it announced last October.
The chip maker said it will continue to operate its 300mm research and development fabrication facility at the Boise site. Financially, Micron expects cash restructuring charges to be in the vicinity of $50 million, which Micron says will generate a gross annualized operating cash benefit of $150 million.
Even behemoths like Microsoft are not immune to the financial crisis. The Redmond-based company might be quite close to large job cuts, according to the WSJ. The much feared announcement could be made as early as next week.
Many analysts have prognosticated a 10 percent to 17 percent reduction in Microsoft’s workforce in the imminent future. Microsoft is due to announce its fourth-quarter results today. PC sales in the last quarter were dismal and are expected to have an impact on Microsoft’s earnings.
Beleaguered Japanese electronics giant Sony is mulling drastic changes to its corporate structure, according to the Times of London. It is on the verge of shutting down many of its Japanese factories and important divisions. The world is gradually becoming inured to hearing about job cuts – if not job cuts themselves - as the global economy sinks deeper into an apparently abysmal financial quagmire. And it is very likely that the next major news of job cuts will come from Sony; it had announced last month that it was going to hand pink slips to 16,000 employees.
Sources within Sony told the Times of London that Sony’s Japanese operations will bear the brunt of the radical changes. The changes might take effect after the upcoming Consumer Electronics Show in the profligate city of Las Vegas. But analysts, especially who have been calling for an overhaul for a long time now, fear that the changes might just be too late in the day.
They want Sony’s boss Howard Stringer to enjoy greater power, if the company is to extricate itself from its old ways. The road ahead is pocked with impediments for the company as it will also have to outmaneuver the global financial crisis.
In today’s economy, job cuts seem to be par for the course. We all expected to see major losses at vulnerable companies such as AMD, Circuit City, and Yahoo. Recently however, we have been seeing cuts at major technology employers that we once considered to be at least somewhat recession proof. These include companies such as Sony, Google, Adobe, and now even Microsoft. What started out as an unsubstantiated rumor now appears to be true and the Redmond based software giant is preparing to let go around 15,000 of its 90,000 global employees.
The bulk of the layoffs are expected to be absorbed by MSN, but Microsoft’s global operations are rumored to be under the microscope as well. Large cuts are also expected at its Europe, Middle East, and African operations. Like most companies in these tough times, this is likely to be more of a belt tightening then a white flag. Profitable operations will likely dodge the bullet but as of this point, the full nature of the cuts is not yet known.
The layoffs are likely to take place starting January 15th, and finish before Microsoft issue’s its Q2 results on January 22nd. 17 percent of its work force is a pretty substantial cut and we will just have to wait and see what brands or product lines will be affected going into 2009.
Forgive us if we're starting to sound like a broken record, but AMD continues to find itself struggling to stay afloat. The chip maker's list of financial woes just keeps piling on, and to date we've witnessed high level executives jumping ship, a new CEO take the reins, billions of dollars in quarterly losses, a Phenom(enal) flop (compared to pre-release hype), a major shift in business operations by splitting into separate design and manufacturing companies, and now another round of layoffs.
AMD has been cutting employees more frequently than some people cut their hair. Earlier this year, the Santa Clara chip maker reduced its workforce by 10 percent, and more recently, the company said it would be cutting another 500 jobs to reduce costs. Now AMD is saying it plans to issue another 100 pink slips, for a grand total of 600 job cuts in this quarter alone.
The additional layoffs means AMD will record $70 million in restructuring charges instead of the $50 million it had previously expected. More charges are expected in the first half of 2009, though AMD didn't say what they would amount to.
Here's hoping Phenom II kicks ass and finally reverses the company's fortunes. If not, one has to wonder just how long AMD can keep this up.
More bad news for big business, as Japan's Sony Corp. announced plans to cut 16,000 jobs, cut back on investments, and pull out of businesses all in attempt to save $1.1 billion a year. The job cuts rank as the biggest ever announced by an Asian company so far in the economic crisis, but some analysts are saying it might not be enough.
"The number sounds big, but this staff reduction won't be enough," said Katsuhiko Mori, a fund manager at Daiwa SB Investments. "Sony doesn't have any core businesses that generate stable profits. After the workforce reduction, the next thing we want to see is what is going to be the business that will drive the company."
Sony already trails Apple's iPod in portable music and the company is losing money on flat TVs. But it could get even worse. Sony acknowledged the market may force its hand at making equivalent cuts from its videogames and movie businesses, saying that the situation was "under simultaneous review."
To weather the storm, Sony said it has also raised European prices for its electronics products. And yes, that could mean higher Blu-ray player pricing, but not for PS3 consoles.
Like it or not, Google is widely considered to be a leader within the technology industry. Flagship companies such as themselves, Apple, and Microsoft are important companies to watch during a market downturn. Downsizing at these multibillion dollar corporations are viewed as a devastating reminder that even the strongest companies aren’t immune to the decline. In a recent interview with the Wall Street Journal, Google CEO Eric Schmidt outlined several cost cutting initiatives to help keep revenue on track.
"We have to behave as though we don't know" what's going to happen, says Google Chief Executive Eric Schmidt. The company will curtail the "dark matter," he says, projects that "haven't really caught on" and "aren't really that exciting." He says the company is "not going to give" an engineer 20 people to work with on certain experimental projects anymore. "When the cycle comes back," he says, "we will be able to fund his brilliant vision."
Here is brief list of changes in store for the engineers at Google:
An increased focus on business diversification. They are expected to focus on display ads, mobile integration, and enterprise software.
Kill off, or slowly starve non-revenue generating products. Schmidt clarified this statement by referring to smaller projects, but hopefully money sinkholes such as YouTube won’t be affected. Some of this has already started with the death of services such as Lively.
Suspension of the 20% rule. This famous decree allowed Google engineers to spend a fifth of their time on any project of their choosing including something completely new.
Closing down offices in Dallas and Denver.
Increased workloads. With the recent pink slips handed out to over 10,000 contractors, someone has to pickup the slack and empty the trash cans.
Does trouble at Google signal the peek of our economic woes or is it just par for the course? Hit the jump and let us know what you think.