Trouble for techland's stragglers

Trouble is surging through techland, as Nokia, HP and other gadget makers cut thousands of jobs to become leaner and more competitive.

HP is offering an early retirement programme to help volunteers spare the work lives of thousands of their co-workers. Gustau Nacarino / Reuters

Trouble is brewing in techland.
For years, gadget makers watched as research-and-development budgets ballooned, while billions of dollars in product losses piled up. But now they are dealing with dramatic downturns in their business by taking equally dramatic measures.
Some device manufacturers are grappling with their financial woes by restructuring certain divisions, while others are trying to optimise operations or shrink their product portfolios. Many, however, are also cutting into the heart of their organisations: their workforces.
"Everyone outside of Apple and Samsung is basically struggling, and not really growing to the extent where they could be adding significant [numbers of] people," says Stephen Baker, the vice president of industry analysis in the technology division at NPD Group, a market research firm.
Collectively, Hewlett-Packard (HP), Nokia, Olympus, Panasonic and Sony have announced more than 84,000 job cuts. At Nokia alone, which said last week that it would be laying off 10,000 employees globally, the reduction means about 20 per cent of its entire staff will be gone by the end of next year.
While many software, e-commerce and app-development firms are growing and hiring right now, few hardware companies - including makers of mobiles, computers, cameras and televisions - seem to be immune from the latest digital downturn, analysts say.
Research In Motion (RIM), the maker of BlackBerry smartphones, is reportedly considering thousands of job cuts this year after noting last month that it had hired two outside firms to help it reboot.
"The ongoing competitive environment is impacting our business in the form of lower volumes and highly competitive pricing dynamics in the marketplace," said Thorsten Heins, RIM's chief executive. "We are continuing to be aggressive as we compete for our customers' business."
Last month, job-loss announcements in various sectors in the United States were "dominated" by the computer industry, according to a report from the global outplacement firm Challenger, Gray & Christmas. This year, a total of 32,599 cuts had been announced by companies in this sector through the end of last month, which was up from just 2,301 during the same period last year.
And the worst may be yet to come.
"We may see more job cuts from the computer sector in the months ahead," warned John Challenger, the chief executive of Challenger, Gray & Christmas.
"While consumers and businesses are spending more on technology, the spending appears to favour a handful of companies," he said. "Those that are struggling to keep up with the rapidly changing trends and consumer tastes are shuffling workers to new projects or laying them off altogether."
Much of the recent digital doom and gloom in the computer sector, ironically enough, stems from the birthplace of the Silicon Valley boom.
At HP, the computer maker that got its start in a garage that claims to be where America's famous tech hub was born, 8 per cent of its workforce is at risk of being cut. Last month, the company's chief executive, Meg Whitman, announced that about 27,000 employees would be let go by the end of the 2014 fiscal year.
To the outside world, HP still ships more computers than any of its competitors. But inside, the company is now offering an early-retirement programme to help volunteers spare the work lives of thousands of their co-workers.
"While some of these actions are difficult because they involve the loss of jobs, they are necessary to improve execution and to fund the long-term health of the company," Ms Whitman said when the dire news was released to the public.
Some camera companies also have little to smile about these days.
The inability to compete profitably in a market full of low-cost models and challenges arising from the digital imaging and printing business have left a negative imprint in Rochester, New York. That is where Eastman Kodak announced 79 more layoffs this month as part of its restructuring plans, on top of a reported 500 others that have occurred since the company filed for bankruptcy protection in January.
Meanwhile, in Japan, a US$1.7 billion (Dh6.24bn) accounting-fraud scandal has depressed the share price - and the employee morale - of the optical-equipment maker Olympus. The Tokyo company has said it plans to eliminate 2,700 positions by March 2014.
Opportunities for TV makers are not much better.
Companies such as Panasonic and Sony are reducing their workforces by the tens of thousands, having failed to forecast how slim profit margins would become in this digital era of flat-panel screens.
"The market really changed in terms of pricing and margin when we went from analogue to digital, or tubes to flat screen," says Mr Baker. "I think a lot of TV companies anticipated - turns out incorrectly - that there would be incrementally more value in flat-panel and digital television than there had been in tube televisions."
The upshot is that these changes in the market are expected to affect not only employees.
They are also trickling down to consumers, some of whom may find a new generation of gadgets to be frustratingly similar. As device makers turn to the cheapest component suppliers to curb costs and boost manufacturing efficiencies, their products will inevitably be outsourced to the same companies.
"The end result for consumers [is] you probably get a little more sameness in terms of the product design and look and feel," says Mr Baker. "To personalise and customise everything, there's an additional cost."
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