The recent spate of firings at tech companies could help them control costs down the road more than they've bargained, by relaxing the job market that has hitherto given high-tech workers a firm upper hand in negotiating contracts with hiring departments.
Such a trend reversal would come at a key time for most blue-chip tech firms, which, as their stocks have plummeted in the past year, have lost one of their most persuasive ways to hire and keep employees: employee stock options. With a lot of employee options deep underwater, many have feared that companies like
would be unable to keep their best workers without significantly raising salaries, and thus operating costs.
But the evidence just hasn't supported that theory, say observers.
"When options were hot, the choice between cash and options was always a part of the negotiations," says a partner at a major New York recruiting firm. "However, with the market slowing down, there is a lot of talent out there looking for work. Cash compensation has not significantly increased, simply because of the law of supply and demand."
Companies certainly have been working hard to increase the supply of available workers. The list of those that have announced plans to reduce their staff is sobering:
AOL Time Warner
, Cisco and
. And if the firings don't make the point strongly enough that companies aren't feeling much pressure to keep employees, Cisco CEO John Chambers said Monday that his company wouldn't reprice options to compensate workers for the sharp decline in its stock.
"I have six relatives who work at semiconductor companies, ranging from classic engineers to human resource types," says Jeff Matthews, president of Connecticut-based hedge fund
. "They range from their second year in the business to 25 years. And everyone's in the same boat now. You're not going to lose a good engineer to a good company because you don't raise his salary and his options are underwater. Most semiconductor companies are cutting salaries or bonuses. Lots of companies have bonus plans that are based on pretax income, and I know some companies that have cut them in half."
Options are hardly dead. Top engineers will always find it tempting to replace their H-P options -- with a strike price of $60 -- with options at a start-up that cost just pennies a share to exercise. But turbulent markets and a less vibrant venture capitalist community are working to reduce, not increase, the number of such opportunities.
hovering around a two-year low, now is as good a time as any to look for silver linings like that. For the basis of optimism, as
said, is sheer terror.