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Optical/IP

More Layoffs Loom for Struggling Sector

As the telecom downturn persists, analysts say more layoffs are in the offing for suppliers already hit hard by staff reductions.

Analysts note a need for further headcount reductions at Nortel Networks Corp. (NYSE/Toronto: NT); and rumors are swirling that Cisco Systems Inc. (Nasdaq: CSCO) may be cutting again.

These layoff talks come after today's Wall Street Journal and Reuters news service cite sources inside Lucent Technologies Inc. (NYSE: LU) to the effect that Lucent will make a series of tweaks and cuts to its headcount throughout the organization until it reaches an employee census of "just over 50,000" by the end of June 2002.

Lucent already has issued plans to cut its workforce to 55,000 by the end of June. It's also said that profitability probably won't happen until 2003 (see Lucent Weighs on the World). As to the possibility of additional layoffs, a company spokesperson says: "We don't comment on rumors, and we'll have more to say on the workforce status in our quarterly report April 22."

Nortel has been cited by several analysts recently as being likely to undergo further cuts. "They need to cut another 2,500 to 3,000 to improve their numbers," says Duncan Stewart, portfolio manager at Tera Capital Corp. And late last month, John Wilson of RBC Capital Markets reportedly stated that Nortel must cut 5,000 to 10,000 more jobs if it intends to break even by 2003. Nortel won't comment on these reports, saying any updates will come with its quarterly report April 17.

Sources say Cisco has been rumored to be contemplating cuts in its facilities in North Carolina and Canada. Some say Cisco makes a practice of ranking its employees annually and lopping off the 5 percent that wind up on the bottom of the list for whatever reason. This year, as the downturn persists, they claim Cisco will likely stick to that custom.

For its part, Cisco refuses to comment on layoff rumors. And while it acknowledges that it aims for 5 percent attrition based on management evaluations, spokespeople stress that any cuts made as part of this "performance management" program are not related to cost-cutting layoffs.

Analysts say none of these rumors should come as a surprise. "When numbers keep decreasing because customers aren't buying, well, you can only manage expenses so much before you need to cut," says Frank Dzubeck, president of Communications Network Architects, a Washington, D.C., consulting firm.

Dzubeck says many companies are being faced with the need for further cost reductions, as carriers continue to cut their spending plans (see WorldCom to Cut Capex? and SBC, Verizon Mull Metro Buys). He further notes that both Lucent and Nortel may find themselves cutting in one part of the company while outsourcing to new hires in remote locations. Manufacturing and software development, for instance, are cheaper to support in, say, Asia than in North America or Europe, and the companies may find ways to increase their reliance on these alternative sites.

Dzubeck and others say the overall downturn has pushed hopes of recovery well into 2003. And he says much depends on the outcome of legislation that may or may not leave the RBOCs free to extend their markets and start buying equipment again (see Tauzin-Dingell Takes Another Step).

Other sources say that, while the potential for more cuts is no surprise, it's hard to gauge what will be needed to get the industry back on its feet again.

"It's clear [these companies'] costs are not in line with revenues," says Steve Kamman of CIBC World Markets. "What's not clear is how far costs will have to come down." He's hesitant to make any predictions, particularly when it comes to Lucent.

"Call me in August," he says. "Every time I've tried to find the bottom with Lucent, it hasn't held."

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com
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johnjohn 12/4/2012 | 10:37:13 PM
re: More Layoffs Loom for Struggling Sector Does anyone know any good headhunters?
knave 12/4/2012 | 10:37:12 PM
re: More Layoffs Loom for Struggling Sector
hey johnjohn,

sorry, but right now there are no good headhunters. just post res on : monster.com, yahoo.careers, hotjobs, to get started. And
be prepared to go into another industry. DO IT
NOW , don't wait. Telecomm is dead. Recruiters
are overwhelmed right now.
giraffe 12/4/2012 | 10:37:11 PM
re: More Layoffs Loom for Struggling Sector Which other industry?
ksig25 12/4/2012 | 10:37:11 PM
re: More Layoffs Loom for Struggling Sector email me, I can put you in touch with some good people to know right now.

ksig25 12/4/2012 | 10:37:10 PM
re: More Layoffs Loom for Struggling Sector sorry, forgot my email address [email protected]
fiber_diet 12/4/2012 | 10:37:09 PM
re: More Layoffs Loom for Struggling Sector Is whacking the bottom 5% really attrition? or has Cisco invented a new name for layoffs?

Lets assume business is flat (that would be doing well in today's environment). If you keep cutting 5% doesn't that mean the remaining workers work load increases? Eventually one starts cutting into the meat.

Sorry, just trying to use logic.
_________________________________________________
For its part, Cisco refuses to comment on layoff rumors. And while it acknowledges that it aims for 5 percent attrition based on management evaluations, spokespeople stress that any cuts made as part of this "performance management" program are not related to cost-cutting layoffs.

fiber_diet 12/4/2012 | 10:37:09 PM
re: More Layoffs Loom for Struggling Sector Is there really a need for headhunters? My guess is most companies are trying to avoid the extra fees associated with using a headhunter. Many of the job postings can be found just with a little extra effort. I have noticed that some of the headhunters are just copying job descriptions.

But, headhunteres can save YOU time. Will the companies want to pay those fees is the real question.

Does anyone have any experience whether companies still pay these fees? If so, have the fees been reduced?
[email protected] 12/4/2012 | 10:37:09 PM
re: More Layoffs Loom for Struggling Sector Hi

If you work on systems your in a whole world of hurt. Modules, Components or devices you will be better off - Potentially. If a Manager then your hurting, if your an Individual Contributor there is more opportunity.

However in todays market a heahunter can only help the true "Superstar" engineer. By definition most talented, sucessful engineers do not fall into the category of Superstar.

A superstar engineer has a quantifiable track record of excellence (a mixture, of education, talent, hard work and luck). It jumps out at you and 5 minutes of conversation is enough to know you have found it.

So if your a Superstar a company will pay a fee. If your not then a company will balk at paying a Headhunters fees, and it will put you at a disadvantage if you are working through a headhunter.

That is the difference in our world over the last
12 months.

fiber_diet 12/4/2012 | 10:37:08 PM
re: More Layoffs Loom for Struggling Sector Consistent with what I'm hearing as well. Thanks for the update.

You point out component people are better off than systems equipment people. Aren't the components part of the business cycle? I would think if they are not hurting now, eventually they might be. When cpital expenditures get whacked 25%, this not only flows down to system houses, but also to the component folks.

May we all wish 2003 is better.
let-there-be-light 12/4/2012 | 10:37:06 PM
re: More Layoffs Loom for Struggling Sector Could someone please explain why the optical components segment should be in better shape than the optical systems space?
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