Do It NowOn the other hand, if a company waits too long to reduce costs, itsprofits will shrink relative to competitors. Indeed, despite the Applied Materials example, analysts have been speculating that semiconductor capital-equipment companies are overdue for staff cuts. "Although many
The Job Outlook NowAfter a round of layoffs at the beginning of the downturn, techcompanies had eased up on job cuts. But now, amid worries about adeteriorating revenue outlook, managements are again growing highlyconscious of pressure to slash costs. In June, the number of announcedlayoffs in the computer industry surged to over 25,000, up from around8,000 the month before, according to Challenger, Gray & Christmas. The same month, H-P said it would speed up previously announced job cutsof 15,000, while warning that it expected its revenue to fall in thesecond half of the year.
|Technology Job Cuts, 2002 |
|Source: Challenger, Gray & Christmas.|
But aside from H-P -- which was planning to lay off workers anyway,following its merger with Compaq -- a couple of leading tech companies have laid off fewer workers than expected. On its earnings conference call in mid-July -- the same call in which headmitted the company would slip back into the red next quarter -- SunMicrosystems CEO Scott McNealy sounded downright defensive in justifyinghis decision to cut only 1,000 employees out of a staff of nearly 40,000. "I'm sensitive to the fact that many of you think we could take theinfrastructure down," he told investors and analysts. But he said Sun istaking a "calculated gamble" by holding the line on deeper job cuts, sayingthe strategy should work, "assuming the economy doesn't do anything morescrewy to us growing forward." In similar fashion, last month Intel announced layoffs of 4,000 peopleout of its 85,000-strong staff. That's a sizable cut, to be sure, butconsiderably less than the 10,000 or so that some rumors had suggested. Both companies benefit from deep pockets, with respective cash holdingsof $2.8 billion and just under $9 billion. By holding the line on layoffs,they may be better-positioned to take advantage of growth when the economypicks up -- after their rivals have downsized.