As Technology Shifts More Layoffs Loom at Tech Companies

As Technology Shifts More Layoffs Loom at Tech Companies

HIGHLIGHTS

  • Hardware companies struggle to keep up with rapid technology shifts
  • This year, technology companies in the US have shed about 63,000 jobs
  • Job cuts to rise as companies subscribe to “super cloud” services

Cisco Systems’ announcement on Wednesday that it plans to lay off 5,500 employees is unlikely to be the last round of Silicon Valley pink slips as hardware companies struggle to keep up with rapid technology shifts, analysts and recruiters said.

Companies that traditionally have made most of their money selling computers, chips, servers, routers and other equipment are especially vulnerable, analysts say, as mobile applications and cloud computing become increasingly important.

The Cisco layoffs come in the wake of Intel’s announcement in April that it was laying off 12,000 workers. Dell said in January it had shed 10,000 jobs and is expected to make further cuts after it closes a $67 billion deal to acquire data storage company EMC.

So far this year, technology companies in the United States have shed about 63,000 jobs, according to outplacement consultancy Challenger, Gray & Christmas, Inc.

“The hi-tech industry is going through a serious deconstruction,” said Trip Chowdhry, an analyst at Global Equities Research. “There is more pain to come.”

Chowdhry said he expects job cuts to rise drastically as more companies subscribe to “super cloud” services from the likes of Amazon.com and Microsoft. These services manage hardware, software, networks and databases and eliminate the need for workers to manage various technology layers, Chowdhry said.

In January, Chowdhry estimated that layoffs in the tech industry would hit 330,000 this year. On Wednesday, he said he had raised his estimate to 370,000. Some other analysts said that forecast was too bleak.

IBM, Hewlett Packard Enterprise Co, Oracle, and Dell could be the next to shed workers, analysts said.

Hewlett Packard Enterprise, Dell, and Oracle declined comment and IBM could not be immediately reached for comment.

Tremors of change

“Tech incumbents are all bracing for the tremors of change. said Glenn O’Donnell, an analyst at Forrester Research. “We fully expect a lot of collateral damage as this plays out – not just with Cisco.”

Cisco and other old-guard technology companies have been 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,” said Roger Kay, an analyst at Endpoint Technologies Associates.

That could mean more job cuts. Silicon Valley job recruiters offered mixed views about the fate of hardware engineers laid off at Cisco and other tech firms.

“Nobody wants to be laid off but if job elimination is going to happen, 2016 is not a bad time for it to happen,” said John Reed, Senior Executive Director of the tech recruitment firm Robert Half Technologies.

Still, recruiters said, hardware engineers may need to be flexible and willing to retrain if they want to find work.

“Nobody wants hardware designers and engineers,” said Andy Price of executive search firm SPMB. “There was a moment in time when devices were hot and (action-camera maker) GoPro made everyone excited about devices, but a lot of those types of companies died on the vine.”

Currently, he said, “hardware engineers are probably the least attractive skill set imaginable in the Valley.”

© Thomson Reuters 2016

Tags: Cisco, HP, IBM, Intel, Layoffs

 

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Cyber-Security Firm FireEye Announces Layoffs

Cyber-Security Firm FireEye Announces Layoffs

Cyber security firm FireEye Inc said on Thursday it planned to lay off 300 to 400 of its 3,400 workers as it announced quarterly sales below its own forecast, due to a slowdown in demand for its services helping businesses respond to hacking attacks.

FireEye’s shares were down 16.2 percent at $14.02 in extended trading.

The Milpitas, California-based company also cut its full-year sales outlook.

Chief Financial Officer Michael Berry told Reuters that the job cuts were part of a restructuring effort that will reduce annual costs by about $80 million (roughly Rs. 534 crores).

Chief Executive Kevin Mandia said the company is now responding more frequently to financially driven cyber criminals, who engage in crimes such as ransomware, which are relatively simple to clean up.

“The size and scope have changed. The whole remediation was more complex” when the company was responding to large numbers of state-sponsored hacks from China, he said.

FireEye cut its full-year revenue forecast to $716 million-$728 million (roughly Rs. 4,783 crores – Rs. 4,864 crores) from $780 million-$810 million (roughly Rs. 5,211 crores – Rs. 5,412 crores).

The company is still targeting non-GAAP profitability by the end of 2017 and expect to generate positive free-cash flow in 2017, Berry said on a conference call.

It reported second-quarter revenue of $175 million (roughly Rs. 1,169 crores) , missing its own projection of $178 million to $185 million (roughly Rs. 1,189 crores to Rs. 1,236 crores).

Executives blamed much of the trouble on a slowdown in its services business, including its high-profile Mandiant forensics unit that helps organizations respond to cyber-attacks.

That division’s revenue rose just 2 percent in the second quarter, compared to a 40 percent increase in the first quarter. Its total number of engagements rose, but average revenue from each one fell dramatically because work performed was less extensive.

Mandia said that was due to a shift away from previous years where there were large numbers of state-sponsored espionage hackers from China attacking customers in the United States.

FireEye and other cyber-security firms said in June that cyber-espionage attacks from China appeared to have dropped this year as the Chinese government made good on a pledge with the United States to stop supporting the digital theft of US trade secrets.

The company reported lower-than-expected billings, a closely watched indicator of future business.

FireEye posted second-quarter billings of 196.4 million, below its forecast of $200 million to $215 million.

It also cut its full-year billings forecast to a range of $835 million to $855 million, from its previous range of $975 million to $1.055 billion.

In contrast, peer Symantec Corp reported second-quarter revenue and adjusted profit above the average analyst estimates, helped by strong enterprise demand for its security products.

Up to Thursday’s close, FireEye shares had fallen more than 62 percent in the last 12 months.

© Thomson Reuters 2016

Tags: Cyber Security, FireEye, Internet, Job Cuts, Layoffs

 

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