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Headcount: It's Uncle Sam's Fault

Headcount tweaked SBC Communications Inc. (NYSE: SBC) last week when it observed that the service provider was looking a bit silly with its public statements. On one hand, SBC complains that its competitors cost jobs by not building their own networks from scratch. While complaining, though, SBC itself, which has cut nearly 30,000 jobs since 1999, continues to lay people off (see Buddy Can You Share a Line?).

SBC responded with a note that, more or less, said that its layoffs are the government's fault. While it welcomes competition, SBC -- and we're just summarizing here -- thinks regulators are ruining the industry by not allowing it to function, unfettered, as a natural monopoly.

"Essentially, companies like SBC are being forced to subsidize their competitors..." writes an SBC spokesman. "When you're forced to sell a product to your competitors for less than cost, things get turned around. Which leads to the proposed job cuts you mentioned in your article."

While Headcount is counting the seconds until its phone service is cut off, let's take a moment to review the past week's hirings, firings, and other telecom employment news:

  • Christopher Galvin, grandson of Motorola Inc. (NYSE: MOT) founder Paul Galvin, resigned after disagreeing with the rest of the board over the company's "pace, strategy and progress at this stage of the turnaround," according to a statement released by Motorola on Friday. "It is time for me to pass the baton to new leadership," Galvin is quoted as saying.

    Galvin became Motorola's CEO in 1997 and its chairman in 1999. Motorola had 150,000 employees worldwide in 2000; it expects to have around 90,000 by the year's end. Galvin, however, faired well during Motorola's massive restructuring. Since 2000, Galvin pocketed about $5.65 million in salary and bonuses -- and that doesn't include the millions he controls in company stock and options.

    Judging from the market's reaction, shareholders weren't real keen on Galvin. Motorola gained $1.02 (9.20%) to $12.11, on a day when the Nasdaq Composite had slipped 2 percent in late afternoon trading.

  • Corvis Corp. (Nasdaq: CORV) is set to announce more management appointments in the coming weeks. Headcount reported last week that Lynn Anderson is leading the finance team of both Corvis and its Broadwing Inc. subsidiary, which caused some to ask: Is Broadwing being run by networking equipment types or service provider types?

    Sources close to Corvis say Broadwing's service provider core is still intact. Richard Putt, Rick Calder, and Mike Stewart are still leading Broadwing's sales and business development efforts. Mike Jones remains chief technology officer. And the company hired Vyvx founder Delwin Bothof as a strategic consultant this summer, to help Broadwing add to its video distribution business. What is changing is that Corvis is taking over Broadwing's finance, legal, human resources, and other corporate functions, sources say.

  • Innovance Networks has cut all but about 50 employees, according to Canadian news reports. The company didn't return several phone calls from Light Reading. But Peter Allen, Innovance's CEO, did acknowledge to The Ottawa Citizen that the company is "engaged in some short-term opportunities, but the timing is really uncertain."

    Translation: Get your flower orders in and drop the black bombazine at the cleaners.

    Innovance, which employed more than 310 employees in February 2002, has watched its long-haul peers transform or go under in the past six months. Ceyba Inc. closed (see Ceyba Shuts Down). PhotonEx Corp. closed (see Ex-PhotonEx? ). Xtera Communications Inc. bought the Metro-Optix carcass (see Xtera Nabs Metro-Optix Assets). And Corvis has more or less become a service provider. Innovance, meanwhile, just keeps getting smaller. About this time last year, the company cut some 80 people from its workforce, and that layoff was only eight months from a smaller cut of 25 (see Innovance CEO: Layoff a 'Rebalance').

  • Riverstone Networks Inc. (Nasdaq: RSTN) spokesman Peter Ruzicka has left the router maker to join his old boss, Andrew Feldman, at Force10 Networks Inc., says a source close to Riverstone. There is no truth to the rumor that Riverstone's new spokesman will be Joe Isuzu, sources say.

    Here's a summary of other industry appointments (and disappointments) from the past several days:

    That's all for now. If you know of a layoff or new hire that we didn't cover, by all means, pass the baton along to [email protected]. If we don't respond quickly, it's probably the government's fault.

    — Phil Harvey, Senior Editor, Light Reading
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    RouterOttawa 12/4/2012 | 11:23:59 PM
    re: Headcount: It's Uncle Sam's Fault There was a big article in the here. Scott Marshall hasn't cleared out his office yet because he thinks he might be able to resurrect the company. Others (like the founders) aren't quite so sure that he can pull it off though.
    miss_jessicaw 12/4/2012 | 11:23:58 PM
    re: Headcount: It's Uncle Sam's Fault Just to repeat another link:


    realdeal 12/4/2012 | 11:23:57 PM
    re: Headcount: It's Uncle Sam's Fault This rag seems to think so.

    telecosm 12/4/2012 | 11:23:56 PM
    re: Headcount: It's Uncle Sam's Fault http://www.enterasys.com/corpo...
    realdeal 12/4/2012 | 11:23:54 PM
    re: Headcount: It's Uncle Sam's Fault 1/2 truth is a whole lie.
    jr2 12/4/2012 | 11:23:39 PM
    re: Headcount: It's Uncle Sam's Fault
    I have a question and I would appreciate if anyone can clear my doubts:

    Let us say company X was acquired by company Y for 80 mil for its IP. Yhe VCs have invested say 70 mil in company X. So, do the VCs take their 70 mil first before the common share holders get to share the left-overs or is the money/stocks are shared among all (common and preferred) share holders based on their share of stocks?

    Thanks in advance:-)
    dljvjbsl 12/4/2012 | 11:23:38 PM
    re: Headcount: It's Uncle Sam's Fault Teh VCs hae a certain number of shares and the resisiual is given to tehm in proportion to their share ownership jsut like everyone else.
    )!(@*#&$^% 12/4/2012 | 11:23:37 PM
    re: Headcount: It's Uncle Sam's Fault In addition to preferred preference that gets taken from the liquidation price, I think then that the preferred shares are converted to common stock and and then any remaining value is distributed across the common shares.

    So you could have a VC getting 5x return on there investment and then getting 70% (typically what VCs own) of whats left.

    I could be wrong, but this is how I understand the preferred preference and preferred conversion to work.
    LostInTheWoods 12/4/2012 | 11:23:37 PM
    re: Headcount: It's Uncle Sam's Fault Normally VCs have a class of preferred stock that has liquidation preferences in the event of merger/acquisition that pays them some multiple of their investment (2-5x typically, I think) before the common shareholders see a dime. Every deal is different based on the bargaining ability and position of the company with respect to the VCs.
    lastofthebohicans 12/4/2012 | 11:23:35 PM
    re: Headcount: It's Uncle Sam's Fault There was a deal late last year that sent
    the ASIC technology from Tenor (and 3-4 engineers that developed them) to Mindspeed's division in Westboro.

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