In a brutal week for the job market, an assortment of companies across various industries announced more than 100,000 job cuts.
The bulk of the job loss news occurred on Monday, when several major U.S. companies announced sweeping job cuts, pushing the day's total to more than 70,000.
Pfizer (PFE, Fortune 500), the leading drugmaker in terms of annual pharma sales, and Caterpillar (CAT, Fortune 500), a heavy equipment manufacturer based in Peoria, Ill., each said they would cut 20,000 jobs. These are the biggest reported eliminations among U.S.-based companies.
Caterpillar Chief Executive Jim Owens blamed the "rapidly deteriorating global economy" in his quarterly earnings report. Later, on Friday, Caterpillar added another 2,110 job cuts to its previously announced reductions, bringing its tally to more than 22,000.
Boeing (BA, Fortune 500) announced its massive layoffs on Wednesday. The Chicago-based airplane manufacturer said 10,000 workers, including 4,500 previously announced reductions, would lose their jobs. The company blamed this on dwindling demand for its aircraft.
Chico's (CHS), a retailer of women's clothing based in Fort Myers, Fla., said on Friday that it was cutting 180 positions. The retail industry has been hard-hit in recent months by a slow-down in consumer spending, partly because so many people have lost their jobs.
Also on Friday, the newspaper publisher A.H. Belo (AHC) said it was cutting 500 jobs. Chief Executive Robert Decherd, in a letter to colleagues, blamed the "rapid deterioration in the U.S. economy."
Saturday, January 31, 2009
HCL, Infosys, Outsourcing, Satyam, TCS, Wipro
Some Silicon Valley companies having second thoughts on outsourcing
Source: SiliconValley.com
The global recession — combined with the Satyam Computer Services scandal and the terror attacks in Mumbai — is changing the once rosy portrayal of endless good days for the growing outsourcing industry.
Silicon Valley companies now must grapple with the risks of sending critical functions offshore even while the economic downturn adds to the pressures to cut costs.
"We are in an environment where companies want to save money, but they also want to avoid risks. Offshoring is seen as an adventurous and risky thing to do," said Forrester Research Vice President Andrew Bartels.
While outsourcing is now a permanent fixture in many American business plans, the industry is facing its greatest challenge ever.
In India, software services companies face tough negotiations as clients seek to further trim costs. At the same time, they are subjected to greater scrutiny to ensure they are reliable and financially stable. In China, contract manufacturers are shutting factories, raising questions about their reliability as well as China's prospects as millions of migrant workers face unemployment.
The once high-flying outsourcing industry that boasted stunning growth has begun to slow dramatically. Infosys, India's second-largest outsourcing company, last month reported its first sequential quarterly drop in revenue and sliced its guidance for the year for the second time. Wipro, another outsourcing giant, warned investors that it expects revenue from its software-services business to drop this year.
Overall, global tech outsourcing is expected to drop 3 percent this year, according to a recent report by Forrester Research.
"We are living in tough times; the macroeconomic challenges are significant and impacting businesses across segments," Wipro Chairman Azim Premji said in a statement.
Satyam scandal
The scandal involving the Hyderabad-based outsourcing company Satyam centered on $1 billion worth of falsified financial statements. Satyam founder and chairman B. Ramalinga Raju has been arrested and stands accused of inflating the size of its work force by more than 10,000 and diverting wages from fake workers. Its Silicon Valley clients include Adobe Systems, Ariba, Brocade Communications Systems, Oracle, Network Appliance and Symantec.
The fall of the outsourcing giant, once considered a leader in corporate governance, shocked India's IT services industry.
"Satyam has scared the pants off of a lot of people," said Forrester Research analyst Stephanie Moore. "If you can't trust them, who do you trust?"
It has forced executives to look more closely at potential overseas partners.
"I get people stopping me in the hallways asking me, 'Should we be in India? Do we have a diversification plan?' " said Cory Eaves, chief technology officer with British software group Misys, which has 1,000 employees in India and also contracts with outsourcing companies, including Palo Alto-based Symphony Services. "Two months ago, I was not asked those questions."
Outsourcing executives say, only half jokingly, that they fear outsourcing firms will announce they will run out of cash in a month — and demand upfront payments, said Vamsee Tirukkala, co-founder of Zinnov, a Silicon Valley outsourcing consultant.
The Mumbai terror attacks in November added to the uncertainty felt by some company decision-makers, he said.
Still, such concerns are not reversing plans to outsource, particularly for startups trying to stretch their dollars. Pressures to reduce overhead in this bleak recession is intense.
It's particularly critical for small and mid-size companies to find cost relief, Tirukkala said. "They have to reduce their (cash) burn rates."
Companies have frozen new projects, said Gordon Brooks, chief executive of Symphony Services, a product development outsourcing company with extensive operations in India. But not those that need to update product offerings.
"They are afraid of losing their customer base if they don't get the new features out to market," he said. "It's a tricky time. It's not so much about growth. It's about doing well in a down economy and coming through on the other side."
The process of finding an outsourcing partner, though, has become more cumbersome. "There are a lot more questions people are asking, a lot more documentation they are reviewing, a lot more interviews, a lot more reference calls," Tirukkala said.
Overseas presence
He is also seeing a greater interest among companies to set up their own operations overseas, or at least have their own people located near outsourcing partners so they can react quickly to crises. "The biggest thing companies are saying is, 'I have to have some control over my operations,' " Tirukkala added.
It is unclear if U.S.-based outsourcing companies will pick up more business as a result of worries about the stability of foreign-based outsource firms.
"To a certain extent it helps us, being a U.S. company," Symphony Services CEO Brooks said. "But I think people understand Satyam was an anomaly, like Enron."
India, though increasingly faced with competition from lower-cost East Europe and other countries in Asia, remains a relatively inexpensive place to find great engineers, CTO Eaves said.
"They've got this huge skill base and a culture a bit like Silicon Valley," he said.
Contact John Boudreau at jboudreau@mercurynews.com or (408) 278-3496.
Worldwide sales of information technology products and services are expected to drop 3 percent to $1.66 trillion.
Global IT services and outsourcing also is expected to drop 3 percent.
The United States is expected to account for 34 percent of the global tech market in 2009 and 2010, down from 37 percent in 2005.
The global recession — combined with the Satyam Computer Services scandal and the terror attacks in Mumbai — is changing the once rosy portrayal of endless good days for the growing outsourcing industry.
Silicon Valley companies now must grapple with the risks of sending critical functions offshore even while the economic downturn adds to the pressures to cut costs.
"We are in an environment where companies want to save money, but they also want to avoid risks. Offshoring is seen as an adventurous and risky thing to do," said Forrester Research Vice President Andrew Bartels.
While outsourcing is now a permanent fixture in many American business plans, the industry is facing its greatest challenge ever.
In India, software services companies face tough negotiations as clients seek to further trim costs. At the same time, they are subjected to greater scrutiny to ensure they are reliable and financially stable. In China, contract manufacturers are shutting factories, raising questions about their reliability as well as China's prospects as millions of migrant workers face unemployment.
The once high-flying outsourcing industry that boasted stunning growth has begun to slow dramatically. Infosys, India's second-largest outsourcing company, last month reported its first sequential quarterly drop in revenue and sliced its guidance for the year for the second time. Wipro, another outsourcing giant, warned investors that it expects revenue from its software-services business to drop this year.
Overall, global tech outsourcing is expected to drop 3 percent this year, according to a recent report by Forrester Research.
"We are living in tough times; the macroeconomic challenges are significant and impacting businesses across segments," Wipro Chairman Azim Premji said in a statement.
Satyam scandal
The scandal involving the Hyderabad-based outsourcing company Satyam centered on $1 billion worth of falsified financial statements. Satyam founder and chairman B. Ramalinga Raju has been arrested and stands accused of inflating the size of its work force by more than 10,000 and diverting wages from fake workers. Its Silicon Valley clients include Adobe Systems, Ariba, Brocade Communications Systems, Oracle, Network Appliance and Symantec.
The fall of the outsourcing giant, once considered a leader in corporate governance, shocked India's IT services industry.
"Satyam has scared the pants off of a lot of people," said Forrester Research analyst Stephanie Moore. "If you can't trust them, who do you trust?"
It has forced executives to look more closely at potential overseas partners.
"I get people stopping me in the hallways asking me, 'Should we be in India? Do we have a diversification plan?' " said Cory Eaves, chief technology officer with British software group Misys, which has 1,000 employees in India and also contracts with outsourcing companies, including Palo Alto-based Symphony Services. "Two months ago, I was not asked those questions."
Outsourcing executives say, only half jokingly, that they fear outsourcing firms will announce they will run out of cash in a month — and demand upfront payments, said Vamsee Tirukkala, co-founder of Zinnov, a Silicon Valley outsourcing consultant.
The Mumbai terror attacks in November added to the uncertainty felt by some company decision-makers, he said.
Still, such concerns are not reversing plans to outsource, particularly for startups trying to stretch their dollars. Pressures to reduce overhead in this bleak recession is intense.
It's particularly critical for small and mid-size companies to find cost relief, Tirukkala said. "They have to reduce their (cash) burn rates."
Companies have frozen new projects, said Gordon Brooks, chief executive of Symphony Services, a product development outsourcing company with extensive operations in India. But not those that need to update product offerings.
"They are afraid of losing their customer base if they don't get the new features out to market," he said. "It's a tricky time. It's not so much about growth. It's about doing well in a down economy and coming through on the other side."
The process of finding an outsourcing partner, though, has become more cumbersome. "There are a lot more questions people are asking, a lot more documentation they are reviewing, a lot more interviews, a lot more reference calls," Tirukkala said.
Overseas presence
He is also seeing a greater interest among companies to set up their own operations overseas, or at least have their own people located near outsourcing partners so they can react quickly to crises. "The biggest thing companies are saying is, 'I have to have some control over my operations,' " Tirukkala added.
It is unclear if U.S.-based outsourcing companies will pick up more business as a result of worries about the stability of foreign-based outsource firms.
"To a certain extent it helps us, being a U.S. company," Symphony Services CEO Brooks said. "But I think people understand Satyam was an anomaly, like Enron."
India, though increasingly faced with competition from lower-cost East Europe and other countries in Asia, remains a relatively inexpensive place to find great engineers, CTO Eaves said.
"They've got this huge skill base and a culture a bit like Silicon Valley," he said.
Contact John Boudreau at jboudreau@mercurynews.com or (408) 278-3496.
Worldwide sales of information technology products and services are expected to drop 3 percent to $1.66 trillion.
Global IT services and outsourcing also is expected to drop 3 percent.
The United States is expected to account for 34 percent of the global tech market in 2009 and 2010, down from 37 percent in 2005.
Layoffs in USA
Morgan Stanley, Goldman mull further job cuts
Morgan Stanley (MS.N) and Goldman Sachs (GS.N) are considering further cuts in staff, the Wall Street Journal reported on Friday, citing people familiar with the matter.
The cuts could affect back-office and support functions including technology, infrastructure and human resources, the paper added.
Morgan Stanley is considering laying off up to 5 percent of its 47,000 employees, while Goldman Sachs is also contemplating further cuts in staff after letting go about 10 percent of its employees late last year, the paper said.
Morgan Stanley, which let go of about 7,000 employees last year, may decide on another round of staffing cuts in the next two weeks, the paper wrote.
The cuts could affect back-office and support functions including technology, infrastructure and human resources, the paper added.
Morgan Stanley is considering laying off up to 5 percent of its 47,000 employees, while Goldman Sachs is also contemplating further cuts in staff after letting go about 10 percent of its employees late last year, the paper said.
Morgan Stanley, which let go of about 7,000 employees last year, may decide on another round of staffing cuts in the next two weeks, the paper wrote.
Layoffs in USA
NEC To Lay Off 20,000, Exit LCD Businesses
NEC said it would lay off as many as 20,000, employees during the coming year, the company said Friday.
The layoff notices came as part of a nine-month financial report for the period ended Dec. 31. For fiscal 2009, NEC now expects profits to decline from a profit of 15 billion yen ($165.9 million) to a loss of 290 billion yen ($3.02 billion), and sales are expected to decline by 9 percent to 4.2 trillion yen ($46.5 billion), with an operating loss of 30 billion yen ($331.9 million).
The layoff notices came as part of a nine-month financial report for the period ended Dec. 31. For fiscal 2009, NEC now expects profits to decline from a profit of 15 billion yen ($165.9 million) to a loss of 290 billion yen ($3.02 billion), and sales are expected to decline by 9 percent to 4.2 trillion yen ($46.5 billion), with an operating loss of 30 billion yen ($331.9 million).
Layoffs in USA, Recession
Hitachi to cut up to 7,000 jobs
Hitachi is to cut up to 7,000 jobs, as it warned it expects to make an annual loss of 700bn yen ($7.8bn; £5.5bn) because of a big fall in global sales. Hitachi said the job cuts would be made globally across its car equipment and electronics divisions.
The Japanese electronics and engineering group had previously predicted it would make a net profit of 15bn yen in the year to 31 March 2009.
Hitachi is the latest Japanese firm to be hit by the global economic slowdown.
The Japanese electronics and engineering group had previously predicted it would make a net profit of 15bn yen in the year to 31 March 2009.
Hitachi is the latest Japanese firm to be hit by the global economic slowdown.
Layoffs in USA
Kyocera cuts 250 jobs
Kyocera will cut 250 jobs from its San Diego mobile phone division as part of a restructuring linked to its acquisition of Sanyo's cell phone division last year.
The Japanese company will lay off the workers from its Kyocera Wireless division in Sorrento Mesa. The layoffs are across the handset division, spokesman John Chier said, but are most concentrated in engineering and manufacturing.
The Japanese company will lay off the workers from its Kyocera Wireless division in Sorrento Mesa. The layoffs are across the handset division, spokesman John Chier said, but are most concentrated in engineering and manufacturing.
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