Telecom Layoffs Tapering Off?

As the Nasdaq Composite probed its lowest point in six years and observers continue to predict bleak outlooks in the telecom industry, a survey of technology job cuts over the past three months actually offers a shimmer of hope.

A survey by Challenger Grey & Christmas Inc., a Chicago firm that tracks employment trends and offers outplacement programs, found that the number of layoffs in the telecom sector fell 52 percent from the second to the third quarter this year, dropping to 39,717 from 83,318. This was 58 percent fewer layoffs than in the same quarter last year. And with only 6,956 telecom layoffs in September 2002, last month had the lowest number of job cuts in the industry since November 2000.

Of course, the law of small numbers is also at work: After 205,557 people in the sector lost their jobs during the first nine months this year, it might be harder and harder to find people to cut.

Still, some observers prefer to look at the glass as half full:

“That’s positive news. That’s the light at the end of the tunnel that we’re all waiting for,” says Jeff Kagan, an independent analyst based in Georgia. “But it’s not over. The pain is not over.”

While the slowdown in layoffs in telecom is substantial, analysts are reluctant to say that it indicates an industry rebound is on the way. “It is probably too soon to celebrate,” John Challenger, the CEO of Challenger Grey & Christmas, wrote in a company release late last week. “Some companies may be down to bare bones now and cannot afford to eliminate any more jobs without going out of business.”

In addition, cutting jobs, like the market, is a volatile thing. You might have huge cuts one month, only to see the numbers plummet to new lows the next. Just because it looks as if the layoffs are slowing down today doesn’t mean that we won’t be overwhelmed by a new tidalwave of job cuts in the months to come.

Beside the effects headcount reductions have on the employees who are let go, cutting jobs also jeopardizes customer service. When SBC Communications Inc. (NYSE: SBC) recently announced that it would soon slash 11,000 jobs, or 6 percent of its workforce, it said it couldn’t guarantee that service and customers wouldn’t suffer (see SBC's Fed Up, But So Are Its Critics).

“With every wave of job cuts that comes, we get closer and closer to where it impacts the customer experience,” Kagan says. “We’re not there yet, but we’ve got to be close.”

Because there has been so much upheaval over such a short period in the competitive carrier market, Phil Jacobson, an analyst with Network Conceptions LLC, says he’s not surprised that the layoffs have subsided a bit. But, he says, he expects we still have a long way to go before we see a long-term layoff lull. “I’m not surprised that it’s slowed down on the competitive side,” he says, “but there are still a lot of potential layoffs left to go on the RBOC side.”

Jacobson worries that the regional Bells have only just gotten started trimming down their operations and that there may be a lot more layoffs to come. While the RBOCs are fairly lean on the service side, they still have a lot of overhead they can cut, and they probably will. “They still have a lot of fat,” he says.

According to the survey, other technology sectors also saw a decline in layoffs over the past three months. Altogether, the telecom, electronics, computer and e-commerce sectors slashed 91,450 jobs in the third quarter this year, down from 132,953 in the previous quarter. While three of the sectors saw a dramatic reduction in cuts, the electronics industry actually saw a 175 percent increase in job losses for the quarter.

”It’s only natural that the job cuts are coming at a slower pace,” Kagan says of the telecom industry. “We’ve been at this for a couple of years now.”

— Eugénie Larson, Reporter, Light Reading
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Hybrid 12/5/2012 | 12:28:27 AM
re: Telecom Layoffs Tapering Off? You don't have to be lazy or stupid to want avoid graduate school. You just have to think (wrongly in my opinion) that there is a faster path to a giant SUV and a home with a pool and digital cable.
Unfortunately, very few US Citizens even aply to graduate school, so many scholariships go to foreign nationals willing to step up.
let-there-be-light 12/4/2012 | 9:36:25 PM
re: Telecom Layoffs Tapering Off? Similar to exponential growth, which accelerates in real terms over time, the reverse process must slow down over time, simply because there are less people to fire. If they continued firing at the rates we have been seeing in the past, we would soon have negative numbers of employees.

Hopefully, no managers will now get the idea that negative employee numbers are a good way of generating revenues.....
Perceptor 12/4/2012 | 9:36:22 PM
re: Telecom Layoffs Tapering Off? The poster is correct, of course. A more meaningful indicator would be the percentage of those laid off relative to the total number of employees remaining in telecom.

If you have 100,000 people working in telecom, with 50,000 laid off one year, and 40,000 laid off the next, you actually have an *INCREASING* rate of layoffs -- 50% the first year, and 80% the following year!

But I'm sure the mathematically well-versed Challenger, Grey, and Christmas took all of this into account before publishing their findings. They may even have attended the same quality courses as their colleagues at RHK!
jyckyllhyde 12/4/2012 | 9:36:22 PM
re: Telecom Layoffs Tapering Off? I hear that First Wave Intelligent Optical Networking hasn't paid their people for the month of September and only paid their people half of normal in August. So I guess the next thing is that the company will layoff whoever is left and shut their doors!
darkone 12/4/2012 | 9:36:19 PM
re: Telecom Layoffs Tapering Off? In reply to
Hopefully, no managers will now get the idea that negative employee numbers are a good way of generating revenues
What do you mean, negative employee numbers could solve all of our problems.

negative profits
-------------------- = positive profits/employee
negative # employees

Did you miss Management Math 101?

darkone 12/4/2012 | 9:36:18 PM
re: Telecom Layoffs Tapering Off? I know of a couple of layoffs that have not shown up here, and I have a good source that Cielo Inc has shut the doors. Maybe there have been so many layoffs that it just isn't news anymore. As far as any industry published figures, I hope we know better than to trust that.

Fortunecookie 12/4/2012 | 9:36:17 PM
re: Telecom Layoffs Tapering Off? What about dotcom? They are laying off much less people too. Is that a good sign? No, it just simply means that business is dead and nobody to layoff.

jim_smith 12/4/2012 | 9:36:15 PM
re: Telecom Layoffs Tapering Off? In order to understand whether layoffs are over
or not, we need to understand the reasons behind
layoffs. Here are my thoughts.

1. Product got canned. The team gets layed off.
I think most of these layoffs have occured in
large companies (except possibly Cisco). These
layoffs will stop when the last startup closes
its doors.

2. Political. For example, RBOC layoffs. Is SBC
making a profit? Yes. Are they laying off people?
Yes. Why? Because they want to make a political
point. These may continue if the political
climate doesn't change in favor of RBOCs.

3. Lower growth. If fewer connections are going
to be set up, then we need fewer people to set
them up. This is also one of reasons the RBOCs
and ILECs are laying off.

4. Fraud. Worldcom. Need I say more. But this is
an exception and hence doesn't reflect the market

5. Reorganization. This kind of layoff is good if
it is done correctly. It allows a company to
refocus on their core competancy and improve the
efficiency of the industry as a whole.

The really worrisome reason for a layoff is (3):
lower growth. Because those jobs are lost

So, unless we see the market turn around and
start growing at a healty clip, it is very bad
news -- layoff or no layoff.
litefocus 12/4/2012 | 9:36:13 PM
re: Telecom Layoffs Tapering Off? To All,
I have been working in the Telecom/Datacom/IP/ATM
sector for Over 15 years as a SW Developer. I worked in Many Many Startups....but I FIND a STRANGE Similarity i.e the Top Management got the Funding etc ONLY via Connection & a Laptop Powerpoint Presentation which a Technical person
like me Understand to be Totally Ridiculas. But
Unfortunately the MBAs from the VC Firms like the Presentation and feel Pretty Strong when they see the Fake Revenue Projections. So Companies pretty much continue with 2nd/3rd round of Funding, and they always Pray that CISCO or somebody will buy them at an Astronomical price. This was the way this Industry was moving from 1996, and from 1999 it was totally out of control before the crash of 2000. I realized Bad Times are in the Horizon:
First it was Ecommerce busted, and then the Others such as Networking/Telecom etc. It seems to me untill & unless VC Firms really understand the Technology some Companies will be able to still get the Funding and waste.....and most VPs &
Senior Managers get the Job on the basis of their University Degree and some Fake Experience which they may have obtained because of a Handyman like me. See now is the Problem for me as well as the others, I am somehow surviving but don't know how long! My suggestion is People should be More Realistic in this Bad Time as to change the area & survive somehow....
And Federal Government may have to do something in the Broadband area to build Investor-Confidence and new Frontiers. Untill this happens I don't see any Improvements.....
lightpimp 12/4/2012 | 9:36:13 PM
re: Telecom Layoffs Tapering Off? More layoffs to come, many more. This thing isn't even half way over with yet. Think things are bad now? Wait until your favorites are trading at a nickel, then the layoffs will "taper-off". The debt must be purged before a new cycle can begin. Without revenues, jobs will continue to be lost. Just the ugly way of business.
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