Do It NowOn the other hand, if a company waits too long to reduce costs, its profits 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, tech companies had eased up on job cuts. But now, amid worries about a deteriorating revenue outlook, managements are again growing highly conscious of pressure to slash costs. In June, the number of announced layoffs in the computer industry surged to over 25,000, up from around 8,000 the month before, according to Challenger, Gray & Christmas. The same month, H-P said it would speed up previously announced job cuts of 15,000, while warning that it expected its revenue to fall in the second 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 he admitted the company would slip back into the red next quarter -- Sun Microsystems CEO Scott McNealy sounded downright defensive in justifying his 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 the infrastructure down," he told investors and analysts. But he said Sun is taking a "calculated gamble" by holding the line on deeper job cuts, saying the strategy should work, "assuming the economy doesn't do anything more screwy to us growing forward." In similar fashion, last month Intel announced layoffs of 4,000 people out of its 85,000-strong staff. That's a sizable cut, to be sure, but considerably less than the 10,000 or so that some rumors had suggested. Both companies benefit from deep pockets, with respective cash holdings of $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 economy picks up -- after their rivals have downsized.