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.