Big trio join retrenching

By PETER GRIFFIN

The United States technology slide looks likely to have a global impact as Intel, Cisco Systems and Yahoo join a long line of technology companies facing cost-cutting and reduced revenues forecasts.

The news has squashed optimism that a recovery in the second half of 2001 could enable technology companies to fight their way back.

Last week Cisco Systems announced plans to shed up to 5000 workers - 11 per cent of its fulltime workforce. Unnecessary staff programmes and travel budgets would also be slashed.

The news came as Intel said it would cut a similar number of jobs.

Internet services provider Yahoo also had a terrible week. Its first-quarter revenue will be $US170 million ($406.5 million) - $US150 million down from $US320 million predicted at the start of the year.

Intel, just two weeks after it delivered an ambitious product roadmap to the industry in Silicon Valley, said it would shed 5000 employees in the next nine months, largely through attrition.

Revenue for the first quarter of the new financial year would be down 25 per cent to $US6.5 billion from $US8.7 billion in the fourth quarter.

The cost cuts are in sharp contrast to the optimistic messages Intel bosses gave at the recent Intel Developer Forum, an industry "geek-fest" held to outline the company's direction for the next year.

On the eve of the event Intel's chief executive, Craig Barrett, said first-quarter revenue was likely to be down between 10 and 15 per cent.

By then the company had already warned of cuts in jobs and revenue, but had not gone into detail.

But it did say that its research and development budget would stay fixed at $US4.3 billion.

"The slowdowns are going to end, and you need to prepare for the upswing," said Mr Barrett.

That budget has now been shaved by $US100 million.

The Intel chief signalled his company could have a "big problem" if the US economic downturn spread to Asia and Europe.

The only reference Mr Barrett made to New Zealand during his speeches was to "brown trout."

Intel now does just 40 per cent of its business within the US, a sign of just how important foreign markets are to the company's revenue.

"Tell me what the stock market will do and I'll tell you the returns we expect to make on our venture capital investments," said Mr Barrett, when asked how the downturn would affect Intel global investments.

The US drop-off in sales of server chips, flash memory and networking chips now looks to have a severe impact outside US borders as well.

And the corporate belt-tightening will filter down to NZ operations.

Intel's NZ unit consists of four salespeople with around 70 people attached to the local arm of Dialogic, a telecommunications software specialist recently acquired by Intel.

General manager Scott Gilmour said cost-cutting such as pay-rise freezes and the suspension of a home-computer programme for employees would extend to local operations, and if people left the company there was a strong possibility that they would not be replaced.

"But Dialogic is a very important software development lab for us. They've grown from 40 people to 70 people over the past 12 to 18 months, so they've been in growth mode, not reduction mode.

"The reduction in head count plans does not include acquisitions. If we acquire companies, obviously we add to the pay roll," he said.

Cisco's NZ manager, Tim Hemingway, said cutbacks would centre on "non revenue-generating" areas, such as people contracted in to work on marketing projects.

"Some of the promotions that we were thinking of doing may be put on hold, but we expect the impact on customers and channel partners to be minimal," he said.

Cisco has 32 New Zealand-based employees.