Tech companies try cutting costs--sans layoffs

Although a number of companies have announced layoffs, others are taking measures, such as hiring freezes and cost-cutting, to avoid the L-word.

Richard Shim Staff Writer, CNET News.com
Richard Shim
writes about gadgets big and small.
Richard Shim
4 min read
Hiring in the tech industry is getting chilly these days and, in some cases, downright frozen.

Although a number of companies have announced layoffs, others are taking measures, such as hiring freezes and cost-cutting, to avoid the L-word.

Big names in the tech world such as Texas Instruments, Sun Microsystems, Cisco Systems and Applied Materials, for example, are tightening their belts without slashing jobs for now.

William Aylesworth, Texas Instruments' chief financial officer, said Thursday that his company is cutting costs by reducing the amount of overtime in manufacturing plants. TI is the largest maker of chips used in cell phones.

?We?re limiting overtime pay in manufacturing because demand has dropped,? Aylesworth said during a speech at the Banc of America Securities' Technology Conference in San Francisco.

According to Aylesworth, TI's wireless customers are still absorbing chip inventory after a few slow months of sales. He expects that the excess inventory will be gone by the end of the first quarter.

TI is also cutting back on travel and reducing the number of experienced workers it hires. The company will continue its college recruitments, he said, aimed at hiring younger employees who generally have lower salaries.

One action the company won't take is cutting the prices on its digital signal processors to spur sales amid weak demand. TI?s customers don?t pick their chips based on price, Aylesworth said. They look at the capabilities.

Unofficial freezes
Other companies are slowing down hiring.

"We don't have what we call an official freeze, but we are being very conservative" in hiring employees, a Sun representative said. A memo from CEO Scott McNealy in late December outlined the more cautious hiring at the server giant.

A source inside Palo Alto, Calif.-based Sun said this week that his division was interviewing candidates to fill job vacancies, but was told about a week and a half ago that hiring was being drastically circumscribed.

"We were looking at candidates, and we've been trying to snatch them up. But we can't pick them up at this time. We've been under the direction of not hiring," the source said.

Chip-equipment maker Applied Materials has asked its North American employees to take off most Fridays until at least the end of April without pay, the San Jose Mercury News reported Thursday. The company is also reducing the number temporary workers at its manufacturing facilities and cutting salaries for top executives by 5 percent to 10 percent, the report said.

Applied Materials spokesman Jeff Lettes would not confirm the report. "We are implementing certain cost containment measures," he said. "I can't comment beyond that because we are in our (earnings) quiet period."

Temp workers
Risto Puhakka, an analyst VLSI Research, said the chip-equipment sector is even turning to hiring freezes.

"There has basically been an unannounced hiring freeze throughout the (chip equipment) industry over the last few weeks."

In the networking world, San Jose, Calif.-based Cisco Systems is slowing the rate at which it is adding new employees. Over the past year, the company has more than doubled in size, adding personnel at a rate of 4,500 per quarter at the height of its growth.

But Chief Executive John Chambers said in the past month that the company would review its hiring rate over the next 30 to 60 days so it can better gauge which way economic and industry trends are going.

Tech companies, such as PC maker Dell Computer, are also trying to save money by reducing the number of temporary workers they use.

On Thursday, temp staffing giant Spherion said the prospects for temporary hiring looks bleak as technology companies look to cut costs.

In its earnings conference call, Spherion Chief Executive Raymond Marcy said his company's business at tech companies will continue to be sluggish for at least the first half of this year. Among information technology workers in particular, Marcy said, his company saw a slow, steady decline throughout 2000 and offered no prediction that the situation there would improve.

"It?s too early to say we have bottomed out," Marcy said.

The one unit poised for growth is the division of Ft. Lauderdale, Fla.-based Spherion that helps companies get rid of employees.

"We are seeing significant prospects in our outplacement career transition unit," Marcy said.

Spherion has, itself, instituted a hiring freeze and has identified 300 jobs that it will look to cut in the current quarter.

"In summary, we're preparing for a difficult year based on the current economic downturn," Marcy said.

News.com's Michael Kanellos and Ben Heskett and staff writer John Spooner contributed to this report.