Saturday, April 25, 2009

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Dot-com collapse prepared Bay Area(Silicon Valley) companies to react to downturn

The dot-com collapse left Bay Area companies better prepared for recession than their global counterparts, according to a survey of senior executives released Thursday by the Bay Area Council.

Seasoned by the 2001 dot-com downturn, three-quarters of the companies had a clear recession plan, while only 66 percent did globally, the council said. Four-fifths have cut discretionary spending, compared with 71 percent globally.

Unfortunately for Bay Area workers, the plans involved layoffs and cost cutting. Every one of the more than 50 companies surveyed by the council said it was laying off 5 percent to 15 percent of its work force.

The layoffs are occurring across all levels of the corporate hierarchy, and many of these "first-round" layoffs have already been executed, the council reported.

Companies are also imposing hiring freezes and using temporary workers or contractors rather than full-time workers while eliminating overtime and reducing employees' hours.

At the same time, attrition is making room for some hires, and companies say they are seeing more and higher-quality resumes. The downturn represents an opportunity for more staid industries to hire top talent, the report said.

Research and development investment has escaped cuts, for the most part, the council said.

The council's Economic Institute conducted the survey with consultant Booz & Co. between January and April. The council, a business-sponsoredpublic policy advocacy group, said it wanted to find out how Bay Area companies were managing the recession, which hit relatively lightly at first but in recent months has cut deeply into regional business activity.

It did not name the companies it surveyed but said they ranged across industries and included both large and small enterprises.

"By now, most executives have moved beyond cost-cutting to thinking about how to strategically capture opportunities offered by the recession," the report said.

Companies also reported reductions in spending on technology, though spending on software as a service showed some growth. The recession will probably speed a shift toward "cloud computing" and subscription software services, the report said.

More than half — 58 percent — of the executives reported pursuing mergers and acquisitions, as opposed to just 38 percent globally, and more than half were also hiring outside talent, despite the ongoing layoffs.
More than half also thought the recession would improve their long-term position.

The global numbers used for comparison were from another, similar study done by Booz.


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