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http://www.insanely-great.com/news.php?id=1803
Industry: Doom, Gloom: No Tech Recovery in Sight
By Remy Davison, Insanely Great Mac
March 10th 2003
Tech wreck drags on amid corporate anxiousness about possible war with Iraq.
Is the US economy heading back into recession? Tech companies slashing jobs indicates
that the worst is still not over. Moreover, stocks Monday slid to a 5-month low and
the Dow Jow fell 2.22%. Meanwhile, US firms cut 308,000 positions in February, reports
USA Today.
Silicon Valley's unemployment rate reached 8.6% in January. Corporate IT spending, a
major measure of business confidence, is flat. Agilent Technologies announced 4,000
redundancies in February, while Micron Technology slashed 1,800 jobs. Half a million
tech jobs has disappeared from the sector since 2000, according to the article.
Analysis: What does this mean for Apple? Like many firms, Apple is hiring and firing
in different divisions. For example, its Retail Stores are hiring (at least some of
them), and its software division, but adjuncts, like PowerSchool, have axed about half
their staff. The difference between Apple and other tech firms is that there have been
no large-scale layoffs; just remember 1995-96 and shudder.
Is that a healthy performance? Yes. Don't forget that Dell cuts thousands of jobs in
its European and other regional divisions in 2002. Moreover, as soon as the HP-Compaq
merger went through last year, the blood-letting began, with the axe falling on
Compaq's Asia-Pacific and European divisions, as well as North America. By comparison,
the stiffest job cuts of the Jobs era were in 1997, when Claris division was gutted to
become Filemaker Inc. and the company world-wide was pared down to its current
9,000,10,000, which is about the size a company generating Apple's revenues should be.
In his Q1 2003 statement, Apple CFO Fred Anderson said the company's guidance
predicted flat sales for Q2, with only a few pennies per share. If that proved
incorrect, Apple should be issuing an earnings warning right about now. But Anderson
said that, essentially, that Apple would not slash either jobs or its R&D budget to
ensure quick profits for shareholders or mere Wall Street popularity. Apple has $4.6
billion in cash, although investments' yields are flat. But it can spend its way
through this weak patch, continuing to innovate, as Anderson said.
What options does Dell have? Slash prices, slash jobs, hope HP doesn't become too
competitive, pray for a recovery. Innovate its way out of a recession? You must be
joking.
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