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Optical/IP

Black Friday: More Layoffs Loom

Grim reaping continued to savage the telecom industry this week, as several large companies reported significant layoffs, and startups sent up signals of woe.

Today alone, Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7), and Ciena Corp. (Nasdaq: CIEN) announced current or pending workforce reductions (see Ciena Cuts 450 Jobs, Alcatel to Cut 10,000 More Jobs, and Avici Lays Off 75).

"The stability we had been looking for -- and I was more bullish than consensus -- is clearly not here," says analyst Steve Levy of Lehman Brothers.

So the cuts continue. In today's news, Alcatel has the highest tally, with an estimated 10,000 staffers set to lose their jobs due to "further deterioration of telecom markets." Stringent European labor laws mean the cuts must be worked out with individual employee organizations, so there's no specific timetable or geographic area Alcatel can pinpoint now. "We have an idea where cuts will be made, but we can only announce something after it's written in stone," says spokesman Klaus Wustrack.

One place Alcatel's already announced layoffs is within its optics business segment, Alcatel Optronics (Nasdaq: ALAO; Paris: CGO.PA), which announced severe cuts September 17 (see Alcatel Optronics Cuts Back Hard).

Ciena's workforce reduction was anticipated by Light Reading sources earlier this week (see Ciena's K2: What Problems?). The company has cut 17 percent of its work force, 450 employees, leaving a census of about 2,197. Spokesman Glenn Jasper says roughly 65 percent of the cuts were made in the Baltimore/ Washington area, in and around company headquarters. While the cuts were made across all departments, he acknowledges that manufacturing, sales, services, general and administrative, and marketing were hardest hit.

Jasper couldn't provide information about specific properties and locations that may close as a result of further consolidation. But he says Ciena's not shutting down any product areas, such as development of its MetroDirector K2, the topic of much discussion: "We support all our product lines." While cuts may occur in particular product areas, he says that's not a sign of lack of support for a product's future.

Avici's reduction of 75 employees -- 24 percent of about 312 total -- is also "pretty much across the board," according to spokesman Paul Brauneis. "We think we've cut to a level so as not to be in the bone." Still, last fall, the firm had about 400 employees; after today, it has 240.

And today's news is just part of a grim reaping that shows no sign of abating. Other layoff announcements have recently been issued by JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU), Lucent Technologies Inc. (NYSE: LU), and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), to name a few (see Component Closures: Trouble Ahead?, Lucent Drops Its Bottom, and Tellabs Lays Off, Warns).

Startups also are hurting, even the ones that apparently have been well funded. After garnering $17 million in funding in March (see Siros Gets $17 Million in Funding ), VCSEL maker Siros Technologies Inc. (Website's up, but it's a phantom) has closed its doors, according to a source familiar with the situation. Equipment maker Mahi Networks Inc. acknowledged it laid off about 10 percent of its staff early in September, although the company has just received sizeable funding (see Mahi Gets a Fresh $75M). At press time, calls to confirm rumors of layoffs at IP router startup Hyperchip Inc. went unanswered.

And there are likely more layoffs in the works, particularly as earnings season looms. In a note yesterday, analyst James Jungjohann of CIBC World Markets wrote that he expects "major restructuring to emerge" from Corning Inc. (NYSE: GLW), including layoffs as deep as 50 percent of the current workforce.

Alcatel, Avici, and Ciena all declined to say they'd reached the limit of layoffs.

Who or what's to blame? Where will it end? There seem to be many answers -- and plenty of blame to go around. Some analysts point fingers at the regulatory climate, others at the market balloon of 2000, which has not only burst but continues to bleed forth corporate scandals.

One thing is clear: The timetable for recovery is still a question. "What we're seeing are [companies] throwing in, if not the whole towel, then good portions of the towel, in finding a way to grow back to profitability," says Levy (emphasis added). "A spending increase? 2004 now looks more likely than the latter part of 2003."

— Mary Jander, Senior Editor, Light Reading
www.lightreading.com
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theanswer 12/5/2012 | 12:53:10 AM
re: Black Friday: More Layoffs Loom Who built the roads outside your residence? Who built your local hospital? Can you teach me how those were accomplished in your community?

Tax payers!!!!!!!!!!!!!!!!!!!
Quantamay 12/5/2012 | 12:27:16 AM
re: Black Friday: More Layoffs Loom Can anyone tell me what's happening with Hperchip Inc these days...

Any news on the products or any other layoffs??

Thank you

Quantamay
Pierre 12/5/2012 | 12:26:59 AM
re: Black Friday: More Layoffs Loom Q,

Hyperchip has gone underground, from all sources - can you say hibernation? The next public appearance seems to be Supercomm, which is forever away.

They have not been in the media for the past 8 months, although the closing of Red Herring, Upside and other bubble-era media outlets may be part of the explanation - I don't see the Wall Street Journal or even the Financial Post covering a comatose private company in a dead segment of a shrinking industry.

Having said this, I for one am still quite interested in this company, whose beautiful HQ and large "Running Man" logo welcome you to downtown Montreal. The parking lot's looking pretty empty these days, especially after nightfall, indicating that even the ones that remain may not be as committed or believing as they were a few years ago...

P
skeptic 12/5/2012 | 12:26:58 AM
re: Black Friday: More Layoffs Loom
Hyperchip has gone very quiet. I would think
that they are running out of money now.
They had the least money in the bank of all
the core-router startups after the last set of
rounds. And its not that nobody is covering
them, its that they are not saying anything
and have no public visibility.

Without more government money, I dont think
they can last long enough to survive.

They are still on the exhibitor list for
supercomm. I suppose the number of people in
the booth and their attitude will tell alot
about whats going on.
kamalpr 12/5/2012 | 12:07:46 AM
re: Black Friday: More Layoffs Loom re: Quantamay's posts, sorry I was myself hibernating from light reading.
the interface makes it v difficult to navigate the news groups. nothing wrong with building a core router in montreal. I just said the salaries suck big time. I came from (high-wage) calif to (low-wage) mtl and figured out might as well go back to India -than work for canadian wages. Im happy with my decision and have no ill-will either against the co. or its employees.
regards
-kamal
TheVoice 12/4/2012 | 11:15:12 PM
re: Black Friday: More Layoffs Loom So! Still skeptical? :)
Perceptor 12/4/2012 | 9:44:06 PM
re: Black Friday: More Layoffs Loom They're gone. They recently (two weeks ago?)auctioned off all assets through Dovebid.

I have no idea if anyone will be left standing to make *anything* when people finally get around to needing a new coupler or laser diode.
optical_1 12/4/2012 | 9:44:04 PM
re: Black Friday: More Layoffs Loom I heard in july they layed off most of the
employees.
optical 12/4/2012 | 9:44:03 PM
re: Black Friday: More Layoffs Loom When will we reach the bottom? Just talk to the carriers and they will tell you that they are forecasting mid-2004, late-2004 for there to be any significant network growth. I'd like to hear what others think. I'm an a strong conserative, but I think this is one of those rare times where government needs to step in and fix this telecom mess.
SiO2 12/4/2012 | 9:44:03 PM
re: Black Friday: More Layoffs Loom optical_1 writes:

> I heard in july they layed off most
> of the employees.

all but 3 execs. the IP is up for
sale for a few $M, which comes with
the (chapter 11) flag account built
in.

SiO2


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