Headcount: Cutting the Fat (Really)

With all the makeovers happening at the nation's incumbent phone companies, Headcount wonders how soon it will be before the RBOCs end up as contestants on The Swan?

How alarming would it be if The Swan host Amanda Byram were at the next earnings conference call, offering hugs and kind words for sniffling executives? "I know it's tough to live up to what all the cable companies are doing," she might say. "But if you just shed some costs, add some services, and stop blaming all your troubles on the FCC, you'll do just fine."

Perhaps this column should just end on a surreal high, but, as format requires, we move on. Here are some telecom industry hirings and firings from the past few days:

  • Going Beyond the Pink Slip: SBC Communications Inc. (NYSE: SBC) whispered late last week that it may whack more than 10,000 jobs by the end of next year.

    No surprise there. Even its latest round of commercials for DSL service features the animated stars of The Incredibles instead of real people.

    Here's what SBC said on the subject late last week, via its SEC filings:

    Over the past 12 months, we have reduced our workforce by approximately 7,000, primarily through normal attrition. Based on a number of initiatives to improve efficiencies, we currently anticipate there will continue to be additional workforce reductions through attrition or involuntary programs that could exceed 10,000 by December 31, 2005.

    SBC employs 165,500 now, and one of those folks, as announced today, is Dan York, an IPTV specialist. Prior to joining SBC, York had his own media consultancy, The York Group, and, before that, he held the title of Senior Vice President, Programming & Development at In Demand Networks, a leading pay-per-view content company.

  • Hire Ground: Do SBC's layoffs contrast with what Verizon Communications Inc. (NYSE: VZ) is doing by hiring an extra 3,000 to 5,000 staff by the end of 2005 for its FTTP (fiber to the premises) buildout?

    Not really. That carrier has been able to pay for those extra resources by tightening up in other areas (see Verizon Expands FTTP Plan). Between September 30, 2003, and September 30, 2004, the carrier cut 11,700 people from its payroll -- about 5.3 percent of its workforce, according to SEC filings.

  • Core Pouting: Routing startup Axiowave Networks Inc. has cut 84 percent of its staff. The company says it is "reducing the number of company employees from 156 to 25, primarily across its sales, marketing, and engineering operations."

    The cuts were needed to save cash while it hunts for more funding. According to a statement on its Website, "Axiowave will continue to support its customers and existing product line during this restructuring," and more information will be available on the company's fate in the next 30 days.

  • Marco! Polo!: Headcount is remiss that it didn't observe when Marco Pagani, former president of Nortel Networks Ltd.'s Optical Ethernet and Storage Solutions group, became chairman of Nimcat Networks, early this year. We noted his departure from Nortel in March and that he was missed at Nortel's Carrier Inform 2004 User Group Conference back in May, but didn't discover he'd landed at Nimcat until just recently (see Headcount: Man-Eating Holiday and Nortel Bigwigs Miss User Conference). Our bad. Nimcat, by the way, is building a peer-to-peer call processing solution that's built into VOIP telephones and eliminates the need for central office equipment. Perhaps someday he'll host a facilities tour of his new digs much as he did so graciously before Nortel ran into a rough patch of securities violations (see On the Job – With Mumford & Pals ).

  • Can't Work Elements: Employees of Network Elements Inc., a supplier of 10-Gbit/s optical networking modules, are in stasis while executives negotiate to sell the company. CEO Bruce Murdock tells Headcount "a significant number" of the 60 employees are on unpaid furlough during the sale process, which began "some months ago" when Network Elements received an unsolicited buyout offer. The company cast a net for other buyers, and expenses are being kept at a minimum until a deal closes -- which Murdock says could happen this week. Murdock says he's only considering offers that would include the employees.

    By way of background, Network Elements was founded in 1998 and has raised more than $100 million in funding.

    We wrap up, as usual, with a summary of other industry appointments and disappointments from the past few days:

    Please keep those news tips coming to [email protected].

    — Phil Harvey, News Editor, Light Reading

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    AutoDog 12/5/2012 | 1:06:30 AM
    re: Headcount: Cutting the Fat (Really) While we don't know the full details of Network Elements' demise just yet, I have to admit I'm suprised they've lasted as long as they did.

    The 10G optical transpoder/transceiver market is littered with corpses of those who tried and failed. Given that, I thought NEI was on its way out when it went out and built a big, power hungry proprietary CMOS ASIC (called 'Lithium') into its transponders. When this didn't sell, they tried to sell it to their customer as a stand-alone chip (a-la GTran 40G), presumably with the same success rate.

    Then I was dumbfounded when NEI bought an entire GaAs IC design team from TriQuint?!? I am amazed they've lasted as long as they have.

    I thik their best case scenario would have been to build a small, but top-performing portfolio like OptronX with a lean & mean staff. Not that OptronX hit paydirt, but they did make it to the liquidity bin.

    Pete Baldwin 12/5/2012 | 1:06:30 AM
    re: Headcount: Cutting the Fat (Really) We got the skinny on Network Elements -- the company says employees are on furlough while the company mulls over some sale offers. Bruce Murdock (CEO) expects to finish a deal soon, and he says he's only considering deals that would include the employees.

    We'll post an update in the morning.
    tun88 12/5/2012 | 1:06:29 AM
    re: Headcount: Cutting the Fat (Really) Very interesting update from the CEO -

    I can tell you now that employees are laid-off, as in done - pack all your stuff and leave the building - happened last week - they are gone - not furloughed.

    Maybe the CEO will decide to provide the real truth to LR in the morning. - But don't count on it.

    FROM LR:

    We got the skinny on Network Elements -- the company says employees are on furlough while the company mulls over some sale offers. Bruce Murdock (CEO) expects to finish a deal soon, and he says he's only considering deals that would include the employees.
    cyber_techy 12/5/2012 | 1:06:21 AM
    re: Headcount: Cutting the Fat (Really)
    I almost got an offer from Axiowave last year. I was actually quite serious about joining them believing they have what it takes to beat Cisco. Whether it was overestimating Axiowave or underestimating Cisco is yet to be seen.
    intrepid 12/5/2012 | 1:06:21 AM
    re: Headcount: Cutting the Fat (Really) Here is what really happened....
    There were 2 companies that were bidding to purchase NEI and NEI furloughed everyone on October 8th pending audits from both companies. When it became apparent that neither of the companies were serious about moving forward, NEI shut it's doors effective October 30th.
    Operations have completely wrapped up!
    There is no support for product in the field.
    All customer orders have been cancelled.
    All customers have been advised of the demise of the company.
    Assets and IP are on sale CHEAP!!!!
    toonces_has_the_car 12/5/2012 | 1:06:18 AM
    re: Headcount: Cutting the Fat (Really) Why did you not go to Axiowave?

    Whatever your reason, it was a good move in hindsite! History has shown it is not wise to underestimate cisco, but I think in this case you were overestimating Axiowave.

    george_19 12/5/2012 | 1:06:18 AM
    re: Headcount: Cutting the Fat (Really) Probably both. Cisco may have pushed them over the brink if they were involved in Cogent's purchase of Axiowave's only customer.


    ATMRules 12/5/2012 | 1:06:02 AM
    re: Headcount: Cutting the Fat (Really) Well what goes around comes around, I remember interviweing there back in Sept of 2000, the usual arrogant personalities prevailed, you know the type, one guy from Nortel/Bay had his feet up on a chair with a pencil in his mouth looking over my resume with a smug expression on his face asking me what was at the beginning of the Cascade frame relay header?....my answer...your company sucked then and it obviously sucks now, I hope I see you on an interview one of these days,,,well see whose laughing now....

    ATMRules.....Axiowave does not!!!
    Upside_again 12/5/2012 | 1:06:00 AM
    re: Headcount: Cutting the Fat (Really) You got same interview as I did. I met three so-called management principals and they didnGÇÖt have clue to what they were asking all the while they told me they couldnGÇÖt tell me what they were making. These guys shouldnGÇÖt be in business for a reason. Plain and simple - they don't know what they're doing, (yet) they give an attitude and arrogance well beyond their experience. It's burned them badly.
    startup_shutup 12/5/2012 | 1:05:57 AM
    re: Headcount: Cutting the Fat (Really) The way to treat this kind of startup managements
    is to SPREAD the word so that they DO NOT get a
    2nd CHANCE in any other gig!
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