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Home Recruitment Silicon Valley layoffs beat any dot.com bust records

About 100,000 tech jobs have been shed in Silicon Valley over the past couple of months and that is just the tip of the global iceberg. Informed estimates are now that more than 370,000 jobs will be slashed in FY 2016-17.

Cisco, Seagate, Intel, Microsoft, Hewlett-Packard, Dell, IBM, and several other tech giants in have rationalised in recent months with job cuts ranging up to 20%.

According to Fortune magazine, the cuts will be deeper than estimated with “hardware” based tech — computers, chips, servers, routers, and other equipment — the most solidly affected as the move to the cloud, mobile, software-defined everything, open standards, and open source gathers momentum.

Here is what we know and please allow for “estimates, errors, and omissions” as reported figures vary widely. This report also concentrates on US-based companies.

Apple

Apple does not comment so there is not much publicly available information. Estimates are that it employs 115,000 staff, and it insources and outsources staff as it needs to. The latest casualties are from its self-driving car project that has about 1000 staff.

Also, the bulk of its workforce is contracted to its suppliers like Foxconn, etc. Apple iPhone revenue and market share have taken a severe pounding, and that affect its supplier’s workforce. Again Apple does not comment. Reports are that Foxconn has laid off over 60,000 workers (55% of its permanent workforce) and is looking to use robotics and AI to assemble the next generation iPhone 8.

Cisco

It initially announced in August 2015 that it would lay off 5500 workers or 7%, but most other sources strongly suggest this is closer to 14,000 or 20% of the 73,000 workforce – its largest layoff in history. While its San Jose headquarters has 12,500 employees and will bear its fair share of cuts, there will be similar cuts to its worldwide offices. Hardest hit may be its Indian operations where it has 7000 engineers.

Cisco has traditionally had a walled garden approach with its proprietary hardware and own IOS operating system. Some say it arrogantly ignored the move to software-defined networking (SDN) on open standard commodity hardware and is now playing catch-up. It also has to find the funds to move from a traditional CAPEX (capital and licencing) to an OPEX (pay as you go) cloud model.

Roger Kay, an analyst at Endpoint Technologies Associates, called Cisco an “old-guard technology company pursuing a challenging shift to software-oriented services. Margins in software services are higher than hardware because they bring recurring revenue, and there are fewer people involved on the cost side leading to more job losses".

“Consistent with our culture, we will treat those leaving Cisco with respect and offer them support through the transition,” Robyn Blum from Cisco said.

Dell and Dell Technologies (EMC)

In January, Dell announced 10,000 jobs would go. Now with its US$67 billion EMC merger/acquisition up to a further 3000 jobs will go soon. Most of the cuts will be in the US from its supply chain, marketing, general and administrative divisions. The new entity has 140,000 employees, so the cuts amount to nearly 12%.

It has said it needs to cut a further US$1.7 billion in cost savings over the next 12-18 months.

Google

Another company that keeps a very low profile. Technically it is the Alphabet Group, and it does not report on individual member companies. It cut 500 staff from its Fibre Division (50%) and is apparently cutting staff from its home automation/smart appliance maker Nest. Although unsubstantiated, its autonomous car division is facing cuts.

And ironically attempts to “Google it” - search on Google+job+cuts was very uninformative.

HPE – Hewlett Packard Enterprise

HPE has a big job after its separation from its predominately hardware based sibling HP that makes PCs printers and more.

At the time of the spinoff, November 2015, it said it need to lose up to 30,000 people. That was after the combined HP under chief executive Meg Whitman had let go 51,000 people in August 2015.

But the big one is the 100,000 or so working in HPE software that was sold last week as a 50.1/49.9% joint venture with Micro Focus. While not technically a layoff, it’s a different business now and not subject to the same scrutiny.

HP Inc

HP is the hardware business and although it is experiencing a resurgence in popularly due to its laser focus on innovation, sales of its personal computers fell 13% Y-o-Y and printers, and related supplies fell 17%. It announced 3000 staff layoffs in February. Analysts predict more will come.

HP’s chief financial officer Catherine Lesjak said the layoffs should save the company US$300 million by the beginning of 2017. The job cuts target personnel in “non-revenue generating” parts of the company, but will not affect staff that is part of strategic areas of growth like 3D printing, she explained.

HP just bought Samsung’s printer business, and the impact of that is yet to be seen. The deal includes more than 6500 patents and 1300 design and engineering staff in South Korea – watch this space as it may well upset the lifelong relationship with Canon that currently makes HP printers

IBM

IBM is always right-sizing and has laid off tens of thousands of staff over the past few years, including sales of its PC business to Lenovo and other divestments.

It announced 5000 staff layoffs in March and as IBM has so many divisions and separate entities it is hard to estimate the percentage that represents. Analysts strongly suggest the layoffs will top 14,000 jobs and that IBM had collectively about 377,757 jobs at the end of 2015 so about 4% of jobs will go in this round.

Interestingly IBM allegedly has 20,000 open positions, but insiders say that it intends to fill only 7000 of those. If ever a company needed workforce rearrangement IBM is it.

The cuts affected workers in the Research Triangle of North Carolina; New York City; Poughkeepsie, N.Y.; and Boulder, Colo. Some positions are being moved to places like India and Costa Rica. IBM said it would close its 70-acre Somers, N.Y., campus and move those jobs to a facility in North Castle, New York.

IBM is doing well in the cloud, analytics, and Watson which now make up 38% of total revenue. There are now about 2000 mainframes left in the world – mostly IBM – and that is down from well over 20,000 in its heyday.

Intel

Details are sketchy here – 12,000 of its 150,000+ headcount or about 8% but analysts say a) it could be up to 11% and b) it could be the most expensive layoff in history as Intel has so many “lifers” on high salaries and huge redundancy payouts on top of the 9-12 months’ incentive. A lifer is loosely described as anyone over 45 who has been with the company 10 years or more. Many of these also have huge stock options

Intel has a huge product line-up based mainly on silicon but over the past few years the decline in desktops (about 60% of its business are x86 chips) and skyrocket in mobile (and it has none of that ARM market) have meant the halcyon days where it could afford to innovate are now over. AMD/Radeon is also over its “clone x86” stigma and hitting lots of home runs with PC makers.

That is not to say Intel is going the way of the dodo, but it probably has one of the hardest roads back to glory.

Intel’s cuts do not include the spinout of 51% the McAfee security business for US$3.1 billion to private equity company TPG (no relation to the Australian TPG).

Microsoft

Microsoft’s job cut rationalisation programme is seeing more services centralised at its Redmond HQ.

As reported by iTWire in July 2016, Microsoft will cut an additional 2850 jobs in 2016-17 on top of 1850 announced in May.

It's Skype London offices will be closed accounting for 220 jobs – all redundancies. This was perhaps inevitable as Skype’s conversion from a peer-to-peer program to a cloud-based app was completed. More staff are slated to go from Microsoft’s European offices, and a further 300 were laid off from its Redmond HQ.

Microsoft said it has “made the decision to unify some engineering positions, potentially putting at risk some globally focused Skype and Yammer roles, and will be entering into a consultation process to help those affected by the redundancies".

The Skype move is particularly poignant as Skype was born in London in 2003 based on the peer-to-peer music sharing app called Kazaa. In 2005 eBay purchased it, and it then went “private” in 2009 before Microsoft acquired it in 2011 for US$8.5 billion. It has now been assimilated into Microsoft’s “Garage” incubator in Redmond, Washington corporate HQ.

Microsoft also sold its MSN China operations to its local partner Xichuang Technology (Beijing). The number of staff affected was not revealed as it is expected these will remain with the new entity.

And let’s not forget its US$11 billion write off and shedding of 4700 jobs from the ill-fated and ill-advised Nokia acquisition.

If you are interested to see the list of acquisitions and joint ventures, Wikipedia has it here.

As of 30 June, Microsoft employed 114,000 full-time staff and about 63,000 of those were in the US.

Seagate

Hard disk purchases and revenue are in free fall, so 8100 of its 45,500 employees or around 18% have to go. It is a hostage of the downward death spiral of the PC ecosystem and SSD. It is trying to diversify into the cloud by buying cloud storage company Dot Hill Systems. At least that’s one company that can eat its dog food.

Comment

You should cut your cloth to fit, and frankly, all these layoffs represent real world circumstances. If the world demands everything as a service (XaaS) why should labour be any different?

There has been extreme bloodletting this year across the board for tech companies, and I have not covered smaller layoffs at Xerox, Qualcomm, Symantec (1200 staff or 10%), VMware (800 or 5%), FireEye (400 or 11%), NetApp (1500 or 12%) and more.

An additional 62,917 jobs were lost in June 2016 from Silicon Valley alone. And then there were veiled threats from Apple, Google, Amazon and more that use Ireland as a tax haven.

Tech recruitment company Challenger commented, “Companies that do not adapt to changing trends will be left behind. Nobody knows this better than technology firms, where the very nature of the business means constantly evolving and shifting resources. We are seeing this play out with Cisco, just as it has played out with Intel, Microsoft, Hewlett-Packard, Dell, and several other tech giants in recent months.”

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Ray Shaw

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Ray Shaw ray@im.com.au  has a passion for IT ever since building his first computer in 1980. He is a qualified journalist, hosted a consumer IT based radio program on ABC radio for 10 years, has developed world leading software for the events industry and is smart enough to no longer own a retail computer store!

 

 

 

 

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