Pity the recruiters

Tech recruiters in Silicon Valley are the canaries. They sing a lot, dress in bright colors…  No, wait. They’re usually the first to get laid off, and often the first hired back when business improves. So now they’re being hit especially hard.
Recruiters Are Sending Out Their Own Résumés.

There are no precise counts of recruiters in Silicon Valley, and no one knows how many are unemployed. But interviews with more than two dozen recruiters suggest that the recession has slammed the profession particularly hard, both here and across the country.

Scores of recruiters have been let go in recent months and new positions are virtually nonexistent. Those that pop up attract as many as 500 applicants. And rates paid to recruiters, many of whom work as contractors, have fallen by about 50 percent.

Tech firms caught by wave, wipeout

The NYT says that tech companies had hoped they were skiing in front of the avalanche that’s claiming the rest of the economy. Clearly they got caught in the carnage, judging by all the layoff announcements in the past month. Tech Companies, Long Insulated, Now Feel Slump.

In the span of just a few weeks, orders for both business and consumer tech products have collapsed, and technology companies have begun laying off workers. The plunge is so severe that some executives are comparing it with the dot-com bust in 2000, when hundreds of companies disappeared and Silicon Valley lost nearly a fifth of its jobs.

Of course, this didn’t come as much of a surprise. Every tech CEO has been watching over the past year as financial markets collapsed and spread through the general economy. Like time slowing down in a car crash, we all knew it was going to hit us, and there was nothing we could do to stop it.

The tech industry is getting hit from two sides: consumers and corporate customers are holding off on purchases due to economic uncertainty. And since credit markets have frozen up, tech companies are having a hard time financing operations.

But the NYT article ends on a somewhat optimistic note. We’re all getting hit hard, but high-tech is still doing better than other industries.

For all the gloom, the tech industry is still far healthier than Wall Street. Unlike the banks, many technology companies are flush with cash. Cisco has close to $27 billion; Google, $14 billion; and Apple, $24 billion. It is likely that some of these funds will go toward acquiring struggling competitors. “The guys that aren’t as strong will be good pickings,” Mr. Coleman said.

Powered by technology, Silicon Valley has stood out as a bright spot for jobs in the United States, with employment growing at about 2 percent a year while national employment slowed. Through 2007, the region continued to add 20,000 jobs, although that positive trend has started to change.

Three killed at SiPort in Santa Clara

On Friday morning, test engineer Jing Hua Wu was fired from his job at SiPort, a Santa Clara startup. At 4pm on Friday afternoon, he returned to SiPort and requested a meeting with company executives. Wu then pulled out a handgun and shot CEO Sid Agrawal, VP Brian Pugh, and HR director Marilyn Lewis. All three died on the scene.

Police locked down the office park on Scott Blvd in Santa Clara and started a manhunt for the shooter. Wu was arrested on Saturday morning in a Mountain View shopping center.

Agrawal leaves behind a wife and two sons in college. Pugh had a wife and 2 young children. Wu is married, with three young sons.

Suspected gunman arrested in 3 deaths at Santa Clara chip startup

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Layoff prompts killings at Silicon Valley tech firm

More trouble in the chip industry

Chip companies, amid slackening demand, lower forecasts and cut jobs

Intel of Santa Clara, […] significantly scaled back its estimate for fourth-quarter revenue. Instead of the $10.1 billion to $10.9 billion it predicted it would take in, the company said it now predicts its revenue will be closer to $9 billion, plus or minus $300 million, a drop of at least 8 percent.

Applied Materials of Santa Clara, […] said its profit in the most recent quarter was 45 percent lower than for the same period last year and announced it will trim 1,800 positions, or about 12 percent of its workforce.

Citing weak demand for cell phones and other gadgets that use chips, Santa Clara-based National Semiconductor lowered its sales forecast by at least 9 percent for the next quarter and said it will reduce its roughly 7,000 positions by about 330.

A month ago, when it reported third-quarter revenue of $10.2 billion, Intel predicted its business would stay flat through the fourth quarter. But Paul Otellini […] promised to provide analysts with an updated fourth-quarter forecast on Dec. 4. Intel chose to provide that revised forecast Wednesday because mounting evidence had made it clear the company’s previous estimate was far too optimistic.

“We saw in just the last few weeks a really rapid deceleration in demand and that’s what prompted the update now,” said spokesman Chuck Mulloy. “We just decided, ‘Why wait until Dec. 4. We know what the answer is now.’ “

Job cuts at AMD

Chip Maker A.M.D. Cuts 500 Workers

Advanced Micro Devices said Thursday that it would cut close to 3 percent of its staff […] The layoffs will affect close to 500 workers, leaving A.M.D. with about 14,960 employees. […] It plans to have the majority of workers stay on at A.M.D. to handle processor designs, while roughly 3,000 employees will head to a new manufacturing operation jointly owned by A.M.D. and investors backed by the Abu Dhabi government.

Cash panic sweeping VC industry

The NY Times reports that some big investors have not been able to meet capital calls from venture firms: Cash panic sweeping VC industry – The capital calls problem. That’s likely to squeeze the Silicon Valley startup economy even more.

VC firms typically make “capital calls” to these investors whenever they need more money to pump into their startups. However now rumors are circulating that Columbia University’s endowment fund is illiquid — that is, it can’t raise the cash it needs to fund current commitments. Harvard, meanwhile, is reportedly trying to sell a third of its private equity portfolio at a steep discount in a “secondary offering.”

Startups should prepare for orderly shutdown

VentureBeat recently held a roundtable discussion on the economic downturn, and its effect on Silicon Valley.

“There’s something going on here other than subprime mortgages,” said venture capitalist John Doerr,  […] “We’ve not only got a debt crisis but a crisis of confidence . . . With the current level of uncertainty, it’s really hard to forecast what’s going to happen going forward,”

Angel investor Ron Conway thinks it could be at least two years before “the storm” ends, in which case any company with fewer than 6 months worth of cash, needs to either sell out, get a bridge loan, or “prepare for an orderly shutdown.”

Tough love from Sequoia Capital

Sequoia Capital hosted a big meeting with their portfolio companies a few days ago. Today someone posted what he says are the slides of their presentation. It’s an analysis of the trends that got us into this financial mess, and some brutal recommendations to startup companies: Sequoia Capital on startups and the economic downturn.

Om Malik at GigOM posted more details about meeting today. He says general Partner Doug Leone advised startups:

  • Unprofitable companies would have a tough time raising cash, so get cash-flow positive as soon as possible.
  • Cutting deeper is the formula to survive, and this is an era of survival of the quickest.
  • Make sure you have one year’s worth of cash.
  • If you have a product, reduce expenses around it and boost sales. If the product is ready, cut the number of engineers.
  • Focus on building the absolutely essential features in your product.
  • Be brutal when it comes to marketing — anything that isn’t working, cut it.
  • Don’t burn through your cash, for cash is king

Dark clouds spilling over the East Bay hills

Credit Crisis Spreads a Pall Over Silicon Valley

According to a quarterly survey by Mark V. Cannice, director of the University of San Francisco Entrepreneurship Program, the confidence of venture capitalists has plummeted to the lowest level since the survey began in 2004.

“Investment in venture firms could dry up if the drought continues and venture firms cannot show returns,” said Ken Wilcox, chief executive of SVB Financial Group, the parent of Silicon Valley Bank.