Cooler heads, smaller staffs

The evolving stock and capital markets have led, quite naturally, to evolving corporate cultures in the tech sector. A big part of the changes have come in employment practices, with each day seemingly spawning a new round of layoffs.

In the past few weeks Motorola has announced it is cutting 2500 positions, Rhythms NetConnections 450, Adelphia Business Solutions 200 and Nortel Networks more than 4000, though that company plans on hiring an additional 4000 workers in high-demand areas.

In general, Wall Street interprets layoffs as positive news, said Eric Buck, director of communications equipment for Wasserstein Perella Securities. Companies that cut staff often are perceived as becoming leaner, more efficient organizations.

This can be typified by the recent layoffs at ADC Telecommunications. Earlier this month, the company released about 400 employees from its systems integration unit, about 18% of that division's workers.

With more than $1 billion in sales for the quarter ending Oct. 31, 2000, ADC is in no imminent danger. This particular division's recent performance has been lackluster, though. For the same quarter, pro forma operating income before goodwill was just $10 million, a 40% decrease year-over-year. During calendar year 2000, the unit experienced significant growth in staffing, largely through acquisition.

“This division is assessing its profitability goals and thought this was the best action to meet those stated objectives,” said a company spokesman.

Such an attitude is typical in a cooling economy, Buck said. When the market is expanding, companies focus on gaining market share while it is up for grabs. But the approach changes during a downturn. “I think, clearly, when you had rapid growth, you might have hired people because people were the easiest solution,” he said. “When that expansion is slowing, you're looking at the most efficient [way to adjust], not the quickest or easiest.”

Of course, the market changes that occurred in 2000 have led to staffing shifts that go beyond simply cutting the fat. Some are merely attempts to stay viable.

Such is the case with ICG Communications. The competitive local exchange carrier (CLEC) declared bankruptcy in November and is in the process of scaling back its planned network expansion. It also announced it is reducing costs by cutting 500 employees by the end of the month, leaving the company with about 1700 workers.

ICG is evidence of a cultural shift among start-ups. At one time, ambitious CLECs would talk of big plans and promising futures. Now the company is focusing on present profits and efficiencies. “The work force reduction is based on our commitment to profitability, as well as executing our business plan in the most efficient manner,” an ICG spokeswoman said.

Of course, not everyone is looking to lay off workers in this economy. Some of the large incumbent LECs, pushing emerging services such as high-speed data, are going to great lengths to expand their staffs in customer facing areas such as field technicians and customer service.

Ameritech, for instance, is moving a step beyond setting up a booth at job fairs by experimenting with placing help wanted advertisements on shopping carts and in movie theaters.

A loosening labor market may make these companies more attractive to potential employees, said Debra McMahon, vice president for Mercer Management Consulting. “I think essentially the dot-com/CLEC crash has certainly enhanced the appeal of phone companies as employers because [employees] can still do some of the cool stuff and have job security,” she said.

Briefly

FCC reauction nears conclusion

With bids totaling more than $16.7 billion, most analysts believe the reauction of C and F Block wireless spectrum will conclude this week after more than a month of bidding. To accelerate the process, the FCC last week began conducting six rounds of bidding per day. A Verizon Wireless-affiliated partnership continued to be the most aggressive bidder, with high bids totaling $8.7 billion. Bidders affiliated with AT&T Wireless and Cingular Wireless had high bids totaling $2.8 billion and $2.5 billion, respectively.