Fowler Associates Labs

by Cynthia Fowler

According to Michelle Kessler of USA Today, the tech recovery everyone expected to occur this year has now been pushed out as late as 2004. This delay is forcing many tech companies to dig deeper in desperate attempts to survive.

Applied Microsystems must sell its chip-testing business, layoff 90% of its workers, and reopen as a software startup business with just 25 employees.

Silicon Alley Reporter, a tech trade journal, earned $12 million in revenue in 2000. Once advertising plummeted after the dot-com fiasco, Venture Reporter took its place. By cutting from 50 to 12 employees, relying on subscriptions and charging for data instead of advertising, it has managed to break even.

Cisco Systems, Apple Computer, CMGI, Hewlett Packard, and Autodesk had to resort to slashing or freezing salaries and tightening their belts on discretionary spending. CorporateEducation.biz executive director Ron Miskie decided to handle administrative tasks himself and postponed purchasing equipment. Penguin Computer of San Francisco decided to stay put instead of moving to a new location to save the company $100,000.

Both Linux and French telecon gear-maker Alcatel were forced to cut jobs in half in 2000. Lucent Technologies is now on round Eight of cuts and has suffered more than 50,000 job losses in the last two years. JDS Uniphase, a network equipment manufacturer, has already cut 20,000 jobs and plans to cut even more.

Companies that have chosen to cut jobs may find that it is harder for them to recover when the economy improves. Banc of America Securities analyst Chris Crespi was quoted as saying "They've cut to the bone, and right now, they (might be) cutting away part of their soul to survive."

Not cutting enough can also have a negative effect. For example, shares of Electronic Data Systems stock plunged last week after it announced an expansion of its sales force at the same time that its earnings expectations were cut.

Tech and telecom employment cuts totaled 33,845 in 2000; 317,777 in 2001; and 198,601 through August of 2002 according to Challenger, Gray & Christmas.