Where Did All the Tech Jobs Go?

Often compared to the Wild West due to its reputation for risk and its frontier sensibilities, the tech industry has seen its share of booms and busts over its storied (if relatively brief) existence. In 2013, a six-year boom period came to a surprising end in the first quarter of the year. And as profits fell and layoffs ballooned, predictions for record growth were turned on their heads.

These dips in the tech sector are hardly uncommon. In fact, tech jobs also dropped in the fourth quarter of 2012, and while the decline was a mere hiccough compared to the much larger decline seen in the first quarter of 2013, it was still significant as a reminder of the volatility that characterizes so much of the modern tech industry. As 2013 progressed, tech giants such as Cisco, IBM, Oracle, and RIM reported hefty revenue losses and declining users. The large-scale layoffs that followed were an expected, if unwelcome, result.

And it’s not just corporate giants that were feeling the pain. Folks looking to start a small business or researching Web hosting providers would do well to consider the fate of buzz-heavy startup Lockerz. The company was forced to trim nearly a third of its staff from its main offices in Seattle, and shut down its San Diego office completely. Other newcomers, such as TaskRabbit and Lytro, were also forced to tighten their figurative belts thanks to shaky demand and industry flux, although they may have been affected by the larger trends affecting small businesses of all kinds in a recovering economy.

But don’t give up on founding a new site or creating tech jobs with your new business just yet. Even in a downturn, the news for the tech world isn’t all bad. Third-quarter reports on 2013 tech startups showed promising first-month returns that helped mitigate the doom and gloom of falling venture capital and burgeoning job losses earlier that year. And long-term, the picture painted by the U.S. Bureau of Labor Statistics (BLS) is rosier still; by 2020, says the agency, employment in all computer-related occupations is expected to increase by 22% compared to 2010 numbers.

Whether such a prediction will come true in an industry known as much for its rapid contractions as its startling growth remains to be seen, but in the meantime, it’s likely life in the tech industry will remain a wild ride.

Where Did All the Tech Jobs Go?

Where Did All The Tech Jobs Go?

After a 6-year boom, the tech industry is facing a surprising slump. Earnings among most of the leading tech companies have “plummeted” with Q1 and Q2 profits declining YoY, venture capital has fallen almost 7%, mergers and acquisitions have declined, stock prices have lagged, and now the talent pool is feeling the impact with a number of layoffs having taken place recently.

The tech industry’s earnings grew from $99.6 billion in 2008 to $182.2 billion in 2012, and 2013 promised more of the same.

Estimates compiled by Thomson Reuters in January 2013 projected that tech earnings would grow 7.5% in Q2, instead falling 3.6%.

The pinch isn’t confined to tech giants. The startup world is also being squeezed.

Cisco

The networking and telecommunications equipment giant cut 4,000 jobs in August of 2013.

The layoffs followed a headcount increase of about 900 since Cisco’s last substantial cut in July 2012 of approximately 1,300 jobs.

The company saw its stock tumble from highs of more than $26 to slightly above $24.

Cisco now sees a worrisome 3 – 5% year-over-year growth for the foreseeable future.

The Cause:

Cisco CEO John Chambers attributed the set back to an inconsistent recovery, a depressed global GDP, and the lack of predictability in Asia and in emerging markets.

The company plans to use the setback to realign its focus, perhaps on the data center industry — an area that grew 43% year-over-year for Cisco.

  • Cisco’s converged architecture grew into a $2 billion business in 5 years.
  • Cisco saw a 32% uptick in its wireless business, marking a record quarter.

IBM

The world’s largest computer services provider began laying off employees in June of 2013 as part of a global restructuring plan announced in April, starting with 1,300 U.S. employees.

The job reduction includes at least 222 people in marketing for the software business and 165 in semiconductor research and development.

According to employee group [email protected], 121 employees were cut from a unit within IBM’s Systems and Technology group, which saw revenue drop 17% last quarter.

Additionally, IBM has eliminated about 128 jobs in Denmark, 250 in Italy, and 700 in Germany, among other countries.

The restructuring will cost $1 billion worldwide, including severance expenses.

An investment analyst predicted that the company is probably cutting 6,000 to 8,000 jobs globally — less than 2% of IBM’s total 434,246 workforce.

The Cause:

According to Bloomberg, IBM said that transformation is an essential feature of its business model and some level of workforce remix is a constant requirement for business.

The company spent $803 million on workforce restructuring in 2012, up from $440 million in 2011.

IBM posted disappointing profits for Q1 of 2013 at $3 a share, missing the $3.05 predicted by analysts — the first earnings shortfall since 2005.

IBM stock fell 1.4% to $201.20 at the close in New York after climbing 5% this year.

Oracle

Oracle cut an unknown number of employees in the "legacy hardware" units from Sun Microsystems’ hardware groups, particularly salespeople and some managers.

Oracle said it has been steadily hiring more salespeople and sales consultants while "downsizing some of the groups whose job was to help them."

The Cause:

Oracle halted development on 3 of its product lines in order to more tightly align its future desktop virtualization portfolio investments with the corporation’s overall core business strategy.

Data base revenue, which has been the cash machine of the company has changed due to new alternative databases and cloud service providers creating competition.

In March of 2013, Oracle reported that new software licenses were down 2%.

  • The decline was reflected in part by the adoption of NoSQL databases offered by Datastax and other services that use in-memory technology and new SQL offerings.
  • Oracle earned $9 billion in revenue in the last quarter, down 1.1% from the previous quarter, causing a steep 6.8% decline in stock prices.

Hewlett-Packard

The world’s largest maker of PCs and printers closed its working site in Germany in February of 2013, laying off 850 employees.

The restructuring is likely to result in the loss of another 1,100 jobs there over time.

Over time, HP plans to cut 29,000 jobs, or 9% of the company in favor of outsourcing efforts and cutbacks to the company’s service offerings.

Estimated job cuts were originally fewer than 2,000 when the restructuring was first announced in 2012.

HP spent $1.7 billion on restructuring in its recent third fiscal quarter.

It expects charges of about $3.7 billion through the end of its fiscal 2014 calendar, with $3.3 billion relating to workforce reductions.

The Cause:

HP is restructuring its enterprise service business, which accounts for 1/4 of the company’s total sales.

HP Enterprise Services has been a “problem child” for the company since first created from the $13.9 billion purchase of EDS in 2008.

In August of 2012, HP wrote off $8 billion worth of goodwill from the unit.

The company has also witnessed growing competition in the PC market from tablet and smartphone devices.

Additionally, interest in its printer division has declined as mobile devices remove the need for large reams of paper.

The company’s problems are compounded by falling prices in the already margin thin laptop, desktop, and server sectors.

HP said the restructuring is aimed to simplify business processes, accelerate innovation, and deliver better results for customers, employees, and stockholders.

It has an aggressive plan to optimize its portfolio and sales and delivery model in order to improve its cost structure, resource management, and operations.

To remain competitive, HP is shifting its focus to improve its business performance on their journey to the cloud.

HP stock is down 42% on the year but was up 15 cents to $16.66 after news of the layoffs.

Zynga

The social game maker laid off 520 employees, or 18% of its workforce, cutting $80 million in staff costs and closing offices in New York, Los Angeles, Austin, and Dallas.

The company also temporarily halted trading of its stock.

The Cause:

A sudden and unexpected decline in web users and slower than expected growth in mobile users.

Zynga lost $209 million in 2012 as its games on Facebook such as Farmville have lost popularity.

Daily active users decreased from 65 million in Q1 of 2012 to 52 million in Q1 of 2013.

As Zynga tried to shift to mobile, it realized that mobile businesses are not as large as the web-based one that led it to success via the explosive growth of social networks.

CEO Mark Pincus wrote, "The scale that served us so well in building and delivering the leading social gaming service on the Web is now making it hard to successfully lead across mobile and multi-platform, which is where social games are going to be played."

Blackberry

The struggling smartphone pioneer cut 250 employees from its Waterloo, Ontario new product-testing facility in July of 2013.

BlackBerry employed about 12,000 workers as of March, following job cuts of about 5,000 last year, according to All Things D.

The Cause:

Blackberry saw dismal Q1 earnings in 2013 of $3.1 billion, selling only 6.8 million total BlackBerrys and losing approximately $84 million.

Just 2.7 million of which were the newest BlackBerry 10 devices, at least 1 million fewer than investors expected.

The company also lost about 4 million subscribers during Q1, leaving the total user base at 72 million. It was as high as 80 million a year ago.

Comparatively, 48 million iPhones were sold in Q1 of 2013, up 23% year over year.

Samsung sold more than 10 million Galaxy S4s during the first four weeks it was available.

At $10.88, BlackBerry shares were down 24.66% in early trading.

Electronic Arts

Gaming giant EA announced in April of 2013 that it will be cutting an unknown number of staff, but rumors have speculated that the number could be in the hundreds or even 1,000.

In July, EA closed German-based EA Phenomic, letting go about 60 staffers primarily focused on real-time strategy games.

The Cause:

EA is restructuring its business to cut costs.

The company has cut jobs in its mobile division, some of its console developers, its business sector, and more.

EA has found competition in free-to-play game companies, an industry predicted to generate more than $20 billion in 2015, or almost 1/3 of worldwide gaming revenue.

Mobile gaming has also brought competition to EA.

Games make up 83 of the top 100 grossing iOS apps and generate 80% of all revenue by mobile applications.

TaskRabbit

The startup that runs a marketplace for outsourcing errands and temporary work projects has laid off a number of staffers as part of a larger restructuring, according to TechCrunch.

The company declined to provide specific numbers of how many were let go “out of respect for those team members who were affected.”

The Cause:

Businessweek reported that the layoffs were more of a sign that the idea of a “sharing economy” has yet to be adopted by the mainstream.

“Apparently, there just hasn’t been enough demand for digitally brokered, informal employment to support a company building such a marketplace.”

The company said that it’s getting leaner in certain areas and expanding in others, realigning the company to support key business opportunities such as:

  • mobile
  • geographic expansion
  • business services
  • marketplace operations

Lytro

Camera startup Lytro laid off an unknown number of workers earlier in 2013, but the company’s new CEO is promising a series of “breakthrough” products in 2014.

The company has only added a net of 5 employees in the last year for a total of 85.

Lytro has received $50 million from Andreessen Horowitz and other prominent venture capital firms.

Now, the company is focused on new and interesting features and is 20% ahead of its internal projections so far this year.

The Cause:

Industry sources say the inaugural camera isn’t selling well so far.

One of the key challenges Lytro faces is that their base model costs $400, a high tab in a market where most people simply take pictures on their phones or might buy a $200 point and shoot.

Sources:

  • TaskRabbit Confirms Layoffs As It Realigns To Focus On Mobile And Enterprise – techcrunch.com
  • Tech industry slips into a surprising slump – latimes.com
  • Beyond Cisco’s downward guidance and layoff carnage lies a glimmer of software – pandodaily.com
  • Zynga to lay off 18 percent of staff, shut offices, slash infrastructure – arstechnica.com
  • Zynga to Lay Off 520 Employees – 18 Percent of Staff – and Shutter New York and LA Offices in Refocus on Mobile – allthingsd.com
  • IBM Said to Start U.S. Job Cuts Today Amid Global Reduction – bloomberg.com
  • Source: Oracle Gave Some Of Their Hardware People The Pink Slip On Friday – businessinsider.com
  • Oracle to halt development of Sun virtualization technologies – zdnet.com
  • Lytro’s CEO acknowledges layoffs but promises ‘breakthroughs’ in 2014 – sfgate.com
  • BlackBerry Sacks 250 Employees – allthingsd.com
  • BlackBerry Reports a Surprise Quarterly Loss, and Forecasts Another – allthingsd.com
  • EA closes Phenomic studio responsible for Command & Conquer: Tiberium Alliances – venturebeat.com
  • EA layoffs show Darwinism at work – venturebeat.com
  • EA misses slightly on revised earnings but hits its revenue targets – venturebeat.com
  • HP closes German site, laying off 850 employees – venturebeat.com
  • HP closes German site, lays off 850 employees – zdnet.com
  • IBM U.S. Job Cuts Reach at Least 1,300, Employee Group Says – bloomberg.com
  • Oracle Q3 Misses Wall Street Expectations With $9 Billion Revenue, 65 Cents EPS – techcrunch.com
  • Oracle Is Bleeding At The Hands Of Database Rivals – techcrunch.com
  • HP Announces Restructuring Plan for Enterprise Services in Germany – yahoo.com
  • HP revises restructuring figures; now cutting 29,000 jobs – zdnet.com
  • HP’s Ax Falls On 1,100 Jobs In Germany – businessinsider.com
  • HP Firing 850 Workers In Germany, Closing Ruesselsheim Office – inquisitr.com
  • BlackBerry Woes Lead To Job Cuts – informationweek.com
  • Apple’s Q1 2013 Breaks iPhone And iPad Sales Records With 47.8M, 22.9M Units Sold Respectively – techcrunch.com
  • BlackBerry Ships Just 2.7 Million BB10 Phones – informationweek.com

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