This page has been archived and commenting is disabled.
Something Wrong? Layoffs Explode In America’s Big Old Tech
Wolf Richter www.wolfstreet.com www.amazon.com/author/wolfrichter
The employment situation in the US has been outright rosy. Initial unemployment claims have been bumping along near record lows. Whether or not companies are hiring, at least they’re not axing people in massive numbers. The unemployment rate of 5.8% is practically comfort inducing. OK, we can smell the odor of the details underneath, but hey. And for September, the Challenger Job Cut Report raved about 2014 being “on pace to be the lowest job-cut year since 1997.”
Got it. Things are good.
Then came October, and announced job cuts jumped 68% from September, and 12% from a year ago, to 51,183. Year to date, job-cut announcements of 414,591 were still down 4.3% from the same period last year. And just as we’re exhaling, we read in the report that this “may mark the kick-off to a fourth-quarter surge in job cuts.” More pain? “It is not unusual to see the pace of downsizing accelerate in the final months of the year, as employers take measures to meet year-end earnings and profit goals.”
So companies are getting their announcements out of the way, including the charges that come with the layoffs – these pesky “one-time items” that keep recurring – so that analysts can focus on metrics they’re supposed to focus on, rather than actual earnings.
Biggest sinner? Retail, with 6,874 planned layoffs for the month, a big jump from September. For the year, announced job cuts were up 5%, to 38,948, following an ongoing epidemic of store closings, restructurings, and bankruptcies [read... What NCR just Said about the American Retail Quagmire].
But the trouble in retail pales compared to what’s going on at the paragon of corporate America, the brilliant hope for the future, the core of innovation: the tech industry. The report divides tech into three segments.
There’s the computer industry which includes permanent layoff queen HP; it layered another 5,000 job cuts on top of the 16,000 it had announced earlier in the year, and on top of the tens of thousands it had announced in prior years. The segment also includes Microsoft which is now implementing its own mega job cuts. In October, the segment announced 6,509 job cuts for a total so far this year of 55,511. That’s up 92% from a year ago!
The electronics industry – Cisco among them – announced 1,648 job cuts for the month, bringing them to 18,153 year-to-date. Up a stunning 136%!
The telecommunications industry – which includes money-losing Sprint, now 80% owned by SoftBank of Japan – announced 5,217 job cuts for the month, which brought the year-to-date total to 20,038. Up 81% from the same period last year.
All three tech segments combined clocked in with 13,374 job cuts in October and 93,702 for the year so far. Up 97% from the same period last year!
That’s more than just the routine tweaking of the work force, where some people get laid off in one area of the company and other people get hired elsewhere. This time it’s serious. And they’re all doing it: Microsoft (18,000), layoff-meister HP (21,000), Cisco (6,000), Intel (5,350), Sprint (2000 on top of the 5,000 by which it already reduced its workforce so far this year), TI (1,100), Dell (1,000), EMC (1,000)…. You keep going like this, and pretty soon you’re talking real numbers.
Tech’s layoff announcements are likely to blow past 100,000 for the year, on track to be the worst year since 2009, when it announced 174,629 job cuts.
So is this the end of the tech bubble? Nope. In 2001, the last time a tech bubble blew up, Challenger reported nearly 700,000 job-cut announcements. Countless startups that were going to change the world ran out of money and were shuttered – without even making layoff announcements. Others slashed their workforce and survived or were absorbed. Large tech companies went through wholesale workforce reductions.
This isn’t what’s happening now. The culprit is Big Old Tech. These are the mastodons that have been around for decades, the tarnished American stars. Many of them are revenue challenged. So they’re on an acquisition spree, trying to grow that way, instead of developing their own products and markets. With a cost of capital near zero after inflation and taxes, thanks to the Fed’s machinations, it doesn’t really matter on what this free money gets blown, so long as it doesn’t get invested in people. Each acquisition has led to layoffs, and still, revenues are mired down. And some of these tarnished stars rack up big losses.
In addition to perfecting their financial engineering, these companies are playing the layoff game. Announcements are impeccably timed, issued with maximum fanfare, and expressed in immaculate corporate speak liberally sprinkled with hype. There would be future savings and efficiencies, it would make the company more nimble, etc. etc. The purpose of these announcements is to goose the stock price. And it works.
The job cutting debacle in Big Old Tech contrasts with the hiring battles in other areas. Facebook and Google don’t have to brag about decimating their workforce and throwing out brains and experience in order to boost their stock price. They are hiring, and their expenses are soaring, but what the heck, in this climate, nothing matters. Then there is a myriad of startups that have neither revenue nor business model, and certainly no profits, but as long as they’re awash in other people’s money, they’re hiring too. But when the money dries up, 2001 will play out all over again, even if to a slightly different tune. Meanwhile, it’s Old Big Tech that’s singing the blues.
And just when you thought we’ve reached the peak of craziness in startup-land, it gets even crazier. Read… Pump and Dump: How to Rig the Entire IPO Market Without Raising ANY Money
»
- advertisements -
In 2005 when GE management took over Nortel R&D was cut from 19% to 12%.
Traditionally Nortel's successes were tied to getting technology to the market in advance of competitors. (the digital switch beat AT&T to market by years).
Nortel went under in 2009.
It does not take long for tech companies to go under with reduced R&D budgets.
http://pragcap.com/quantitative-easing-the-greatest-monetary-non-event
QUANTITATIVE EASING: “THE GREATEST MONETARY NON-EVENT”2009
The ugliest two letters that those American " mastodons" no longer carry in their lexicon only because the guys in the boardroom don't want to lose that yearly Xmas bonus "R&D". If it's profitable buy it from someone else who's unprofitable and cut out the piece that is always the most expensive and problematic!
No risk... No growth... Just lots and lots of "downsizing" so that the guys at the top keep winning the "Powerball"!
This is when you know nobody at the "top" or the "bottom" cares anymore about who they work for or the quality of the products they deliver.
the market became glutted.
covert.co.nr
Wake up bitches: BOTH Dems AND Repubs are pushing hard for immigration reform so that Silicon/NSA Valley can get millions more H1-B employees from India, China, Taiwan, Singapore, etc. on 5the cheap.
On top of that, they'll BOTH allow in more unskilled Hispanics so as to not lose a competitive advantage to the other when trying to win elections.
Also, automation & technological analysis via metadata will literally make half of the U.S.'s AND WORLD'S current jobs expendable soon (manufacturing-intense nations such as China, South Korea, Germany have even more at risk, which is their existence in anything close to current form, than even the U.S.).
Governments will be attempting to devise ways to keep labor participation rates from collapsing to the 50% and even 40% levels in order to stave off revolutions.
Get prepared for the Big Shit Storm. We've only got the appetizer thus far.
If one breaks up the quanta [economic fundamentals] that govern the normal course of affairs in Capitalism to replace that with financialization
[anti-quanta corruption, oligopoly, massive government theft [see the Pentagon lost trillions, 911 deception, Iraq War and WMD, et cetera] the system will automatically degrade to the point of implosion. The ethics of old school capitalism have disappeared to be replaced with an overarching oligopoly of corporatists that have nowhere to go but down from here on out. Quantum Behavioural Economics clearly indicates where and when the central planners distorted the individual quanta to serve their financialization schemes and corruption worldwide. People like Lloyd Blankfein know nothing of what they are doing to the global economic system when they skirt acceptable institutional standards in favour of fines and mild sanctions. The end result of years of corruption have rendered the ethics of the industry into something that contemporary business minds will find counterproductive in the long run. And in the long run the central planners, and their faulty plans, will fail miserably into disuse and become defunct. The 'cartel pricing' model of financialization has been broken since 2008 and that will work its way through the system in waves of layoffs, firings, suicides, murders, and resignations. A quantum leap out of financialization will not be an easy step for corporatists or the Tech sector. Bubbles will continue to burst and markets will continue to flatline. Bankers will jump from buildings and Bankruptcy trustees will continue to reap the whirlwind until all the corporatists and bankers have no more competition or money left to gamble with. Then everyone will ask who was responsible for the removal of Glass-Steagall regulation and everyone on Z/H can give them the answer if they turn the power back on and the MIC does not kill you in a FEMA concentration camp filled with weaponized Ebola.
Happily, Obola and his Democrats and RINO buddies will give work permits/green cards to at least 35 million illegals and that will fix the unemployment problem in this Country.
/s
Actually, they just see their instigated Noah's Ark flood of illegals as future Dem FSA voters. Obola and the Dems could care less about jobs for us little people.
No worries, they will give you enough welfare for you to barely survive a miserable life and vote for them in the next election.
i don't really know anything about computers. in high school i took elective classes in electronics and loved it, but just a few short years after and circuit boards became mostly obsolete. i didn't want a corporate life so i went a different direction and got screwed by obamacare/healthcare/insurance companies/etc... destroyed my profession. i have no clue where i'm going to work or what im going to do and have a shiite load of student loan debt. all i can say is if you have children, never ever tell them to go into healthcare.
i'm bitter. sounds like tech got hit very hard and that supprises me. but listening to you guys i understand what is happening. sounds like its happened everywhere.
and hasn't got much better for most. worse for many.
it really bothers me that i have a terminal degree with high degree of skill and knowledge and i go to apply somewhere and they say they can't hire me because im over educated and qualified. its like ive screwed myself into this box that nobody wants to look into. so i put together a second resume and dumbed myself down to look better. and when that didn't work i put together a third resume and dumbed myself down even more. so im looking at a future at 8-10/hr.
fibonacci's claus
I'm sorry to hear that. I wish things were better for you. Know that this was done to us - all of us - on purpose. People can't hire when the government - banking complex is stealing literally 60% of every bit of productive activity out there.
It's crazy. I wish you the best. Keep an ear to the ground: who knows, maybe you can find an industry that's doing better.
I noticed most of the agenda's coming up are all social issues, not a speck of mention of actually changing policies that are killing Amerika.
Focusing on the effect rather than the cause - the cause has been policies that underpinned, firstly, the largess given to the useless banks and US transnationals and secondly, a multi decade obsession with globalisation and free trade which has gutted the US economy and only benefits the 1%. Knowing this and changing it are two different things. The 1% are making too much money from ‘asset stripping’ the US economy.
Large companies are moving into contracting more and more of their staff.
Exactly, our labor is being transferred to the shareholders. The shareholders create trust funds for their families. Their families live off the trust funds. This frees up the trust fund family to move into politics.
Hidden from view are the politicians as the shareholders. The politicians make the rules for these companies.
Romney, "Corporations are people, my friend... of course they are. Everything corporations earn ultimately goes to the people. Where do you think it goes? Whose pockets? Whose pockets? People's pockets. Human beings my friend."
Actually the shareholders in tech aren't getting rich. Seen how much of a dividend most of these companies pay these days? Almost nothing. Social media tech doesn't pay any dividends and just destroys capital.
The real beneficiaries appear to be the users, who get all the free software, and low-cost "technology" at far less than the long-term cost of producing it.
Right on ... We use to sell tech, now we give it away for clicks to advertise stuff that nobody buys ... I see this not working for very long.
They are all off to make their fortunes in
https://www.academia.edu/9161420/Pita_as_Art
Discontented middle class
http://andreswhy.blogspot.com/2013/04/the-pleasures-of-civil-war.html
One category missing in Tech is software programming and development. These jobs do not conveniently fit within a single company and their numbers are massive. Instead, thousands of programmers and designers work across the Fortune 1000 and to estimate more than 100,000 jobs is probably a conservative. When these jobs get cut, apparently they do not even appear in the Tech industry job reductions.
We have all heard about the tech start-ups but most of them don't turn into the next "big thing" and the failure of these businesses come with a cost. Small business failures should receive a lot more attention then they do, we will see a lot of these in the near future as people have started down this path when unable to find a job. Small business is hard, going into business is risky, and many people are not up to the task.
As a property owner that leases space to many start-ups I have a keen interest and knowledge of the microeconomics that occur. Just as important is the effect, long and short term on the economy. With most business start-ups having a very short lifespan of just months or around a year, the short term burst of spending is quickly followed by the longer term negatives. More on the toll taken on all of us when a small business fails in the article below.
http://brucewilds.blogspot.com/2013/03/small-business-failures.html
Good point. So many startups started in the Silicon Valley in the 1990s because the young engineers were well paid, could pay off their houses, and were able to, on the strength of a good job and a robust labour market, take some risks in life. Many had some appreciated stock as well which they could use to fund a startup.
These days, most young engineers in the Silicon Valley can barely just pay rent, and home ownership is but a distant dream. Pay is down dramatically, and if they lose a decent job at a tech company, the likelyhood of being able to return after a couple years if a startup fails is quite minimal. After all, the firms are addicted to hiring foreigners, typically new grads, on H-1B visas.
The effect on the startup culture has been devastating. Some have turned to VCs, but VCs, typically being bankers, most often have no clue what really can make money in tech, and they are usually horrible allocators of capital.
AT,
‘most of them don't turn into the next "big thing"’
The next big thing should be Tesla and along with the resulting ‘green shoots’. However, instead we merrily bailed out the old tech, GM.
The topper, October 21, 2014 “GM backs anti-Tesla Michigan bill”
We’re trapped in old tech. We're going to be here for a long, long time.
Because currently teh gov't is busy spending money on bombs and guns...
Good thing Republicans got our backs. Republicans said they'll stop the illegal invasion.
Happy Days are here, just hold on for a few more weeks.
To hot to work to cold to buy shit! Got it?
Cable companies took over the ISP connections. Now people are cutting their cable bills so they can pay their rent and mortgages. Who needs NSA infested equipment these days. Arrest Loyd Blankfein for destroying the world.
Bitcoin Last Price: $343
Not so much losing them as they are evolving just as fast as the tech that envolves their development and maintenance.
I manage 100-1000+ servers by myself rather easily in a virtual enviroment, of course this takes a team of people with their identified specialties, but it takes far, far fewer then it did only 5 years ago.
I got out of the IT world back in 2010. What a miserable life.
I see the same thing. On the other hand, I see a lot of people who don't have a clue what they are doing calling themselves IT Directors, IT Managers, and CIOs for small/med biz whom I doubt have the technical ability to even spell IT much less make rational decisions about it.
Also, marketing people who seem to rule tech companies need to be sent to their own personal gulag.
Why did Microsoft have to release a completely crippled Exchange 2013 and then take a year to release the first SP to make the thing actually work? Why do you get documents referring specifically to Exchance 2010 when you search for issues related to 2013?
Lots of baling wire, duct tape, and undocumented "custom" solutions out there waiting to break, breaking, or already broken.
I think of this period as peak complexity multiplied by peak idiocracy. We left happy endings behind a long time ago.
Sprint sucks ass, I can't believe they have any subscribers left.
Those are the people who got screwed and ripped off by AT&T, T-Mobile, and Verizon. Now they will get screwed by Sprint.
With education in this country more expensive than ever, and foreign countries students trashing American students in math scores, it's a foregone conclusion that we will not be turning out the talent and skill in numbers we need to meet the future challenges. We already have to hitch-hike on someone else's rockets to get into space. And if you don't grow up with it, you don't really learn it. Technical knowledge starts with hobbies. One of mine was gas model airplanes. When I was a kid, you could get into it and start flying for less than $30.00. Now you need a $600.00 a year liability policy before you buy that airplane, unless you want to build it and have it sit on a shelf. We have regulated our liberties and futures away with parasitic politicians and attorneys. You have to feel bad for kids today, even if you hate kids.
We have and are churning out shitloads of talent and skill. Especially in the IT sector. Except that when these grads go to apply for jobs, there just aren't any. They've all been given to the foreigners who work for half price.
I work at a major engineering company. I know the recruiters who go out hiring at American Universities. They hire Americans when they can find them but a majority of the best engineering students are from abroad. It has nothing to do with visa or salary. It has to do with drive and hard work and engineers from other country want what we got and are mostly willing to work harder than we are to get it. It is disappointing for me but we have no one to blame but ourselves. My brother is a teacher and told his high school students about this situation. The students went home and told their parents and he was reprimanded for telling them they were dumb.
Ummm, no, they don't hire Americans when they can. They give preference to the foreigners because they can be hired/retained for cheaper over the long term. Americans get whatever crumbs are left over, which, increasingly, is nothing. Even post-graduation employment rates from some of the top engineering schools in the country such as UC Berkeley and Cornell, are less than 40%.
So that company in California that was paying H1B visa programmers $1.23/hr wasn't motivated by lower salaries?
I worked in IT for 12 years. The field was flooded with Indians and other South Asians. Most of them sucked ass, but they were much cheaper than Americans who sucked ass. The best and brightest aren't going into IT anymore because they don't want to be replaced by H1B slaves or have their jobs outsourced.
Exactly..as a 'millenial', most of the talented and smart people aren't working in IT..and the ones who are are working at places like Google and Amazon.
IT jobs are for MUDS.
Oh... that must have been why I was forced to train my foreign worker replacements when I worked in IT because they were so awesome.
"It has nothing to do with visa or salary."
srsly?! lolzers. It has EVERYTHING to do with salary and bennies. Have you been listening to Hannity or something?
-------------------------------
Dark_matter wrote:
What a load of horsecrap. Corporations prefer cheap, immigrant labor (CIL) over older, American engineers and IT professionals. Get over it. You are a typcial, greedy Republican, and a good examle as to why, as Rand Paul recently said, "The Republican brand sucks."
-- Paul D. Bain
PaulBain@PObox.com
-------------------------------
Most of IT is dominated by flaming liberals like Bill Gates, Mark Suckerberg, and Jeff Bezos. At least 90% of IT companies are run by lefties and they demand more H1B's and open borders.
The establishment Republicans aka RINOs do suck but let's set the records straight. Not many politicians have stood up for American workers, but the few that have are to the right.
Dennis Kucinich and the (admitedlly few) few genuine liberals in the Democratic Party invalidate your thesis. If Ron Paul and he had half the political savy that is ascribed to them they would have ran a party unity ticket in 2008. Just having them in the debates would have been worth it.
Talent means nothing if you don't have PHYSICAL resources with which to work with.
Rockets, airplanes.... energy-sucking units that only the privileged will have access to, and for not much longer.
'My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel'. - Sheikh Rashid Bin Saeed Al Maktoum of Dubai [or so is believed]
Economies of scale in reverse. Are folks getting this yet?
Bug, meet windshield.
Unemployment and interest rates are low, stocks are up, closer to energy independence than ever, the economy is in great shape and corporate balance sheets have been strengthened. All is great. POT US O'bummer said so (more or less).
Don't worry about tech...the movers and shakers of the tech world are going to kill off their industry with the same gusto that manufacturing used to kill off THEIR industry.
The tech revolution COULD have been a real game-changer for humanity. But it came too soon...we aren't ready to make the changes we need to make, and our mis-use of all this tech will end up creating a world that cannot support the industry.
The tech revolution only happened because we were growing wealthier as a society. But since tech has been used to kill jobs and drive down wages, that has now reversed, and the conditions that existed to nurture tech will be gone.
Declining wages mean fewer and fewer customers able to BUY the toys, the student loan problems and the horrid job environment will mean fewer people with the knowledge and training to work in tech. The commandeering of the toys by governments seeking to control their people mean that these 'big brains' in tech will eventually find themselves working for Big Brother instead of dreaming up wonderful ideas over there in Silicon Valley...they may not be given a choice.
And when the techies give out the call to arms against this, they'll find no one cares, as long as there's an app for something shiny on their little phones.
I greened ya, but the one thing I would add is that outsourcing begat automation, and between the two they wrecked the industrial sector here in the US. I USED to build the automation controls for electro plating and metal finishing machines. I got axed in favor of a young fellow I trained.
I should have left him to wallow in his ignorance.
Actually, common sense begat automation, and it's only going to accelerate. Human labor is in its twilight, or paid human labor that is.
Trying to compete with Asian labor costs begat the automation, although it was coming anyway. Like the Jetsons, we need a 2 hour work week and high pay so we can keep on consuming those consummables.