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Are internships the new tech prize?

Internships are becoming coveted positions in the listless job market, attracting a bumper crop of overqualified candidates as companies slash entry-level job programs.

Former Solectron engineer Ram Santhanam was at a party recently when a woman sidled up to him and told him that she hated him.

Santhanam, it seems, had been selected for a highly competitive position that the woman had also been seeking: an internship at Sun Microsystems.

Although the woman was only kidding, the scene underscores the intense rivalry for jobs in Silicon Valley these days, where even lowly internships have become a career battleground for job-hungry geeks.

"It's definitely competitive out there," said Santhanam, who was laid off from Solectron in 2001 and is pursuing a master's degree in business in the hopes of landing a marketing position. "The employers have their choice from a whole set of experienced people."

Once snubbed as a haven for those who couldn't find a real job at a dot-com or elsewhere, internships have become a coveted prize in the listless job market, attracting a bumper crop of overqualified candidates at a time when companies are slashing entry-level job programs.

That's making it harder than ever for first-time graduates to get a foot in the door at major companies such as Microsoft or Sun Microsystems, where many new hires are drawn from the intern pool.

The grim prospects for interns reflect broader trends in the technology employment market, which has lost more than half a million jobs in the United States in just two years. What's more, the unemployment rate in tech-heavy Santa Clara County, Calif., stood at 8 percent in May, outpacing the state's 6.6 percent rate.

Traditionally, internships have been a bright spot for hiring in a down economy, as companies look to spread work among fewer employees.

However, the programs are being hard hit this time around. Like many companies, Sun has trimmed its internship program from 1,000 positions during the heyday to about 600 this year, meaning there are more people than ever applying for fewer positions.

The cutbacks come as the pool of intern applicants is swelling with ranks of experienced workers who have returned to school for additional training or a second degree. Lacking full-time offers, many of these people are happy to take whatever they can get, giving employers a steady stream of overqualified candidates.

"I've heard people say, 'I just want a job,'" said Wendy Dow, who coordinates Sun's M.B.A. intern program. "A lot of the talent we're seeing on the resumes is just amazing."

Internships were designed to let current students or recent graduates get a firsthand glimpse of corporate culture and get some work experience--however low-paying or menial--under their belts.

But these days you have to have some experience to get some more. Students who have already worked at companies are edging out those who haven't--jumping at any opportunity that resembles employment.

"Many people are graduating and just looking for something to do," said Bill Coleman, senior vice president for compensation at Salary.com. "If they're not going to get the full-time jobs they thought they were going to get, many are resorting to internships."

Those trying to place interns said that students who once would have had multiple internship offers are now lucky to get just one.

"This year has been the worst I have seen," said Judy Tsujimoto, who for more than 20 years has coordinated the engineering co-op program at the University of California at Berkeley, which places engineering students in six- to eight-month internships. "I think companies have reached a bare-bones budget," added Tsujimoto, who has many more applicants than positions to fill.

And a lot rides on getting an internship, especially with the grim hiring scene. In a survey of 357 companies by the National Association of Colleges and Employers, hiring managers said nearly a third of their new hires came from their pool of interns.

Resumes pile up
At Microsoft, that rate is closer to two-thirds, according to Colleen Wheeler McCreary, a technical recruiter at the company.

Although she doesn't have exact figures about the number of intern applicants, McCreary said the stack of resumes on her desk was twice as high this year as it was last year. And the experience is impressive.

"A number of the intern applicants I interviewed had been CEOs or CTOs," McCreary said. "They had great titles at very small companies or very well known companies."

About 750 interns are selected to participate in Microsoft's highly popular program. They're often assigned a product feature to handle during their stint, and this summer interns are working on projects ranging from extra games on smart phones to new features for Office 12 and the Longhorn operating system.

McCreary said the interns benefit the company, too. "The interns bring new life and a fresh perspective," she said.

Peter Vogt, president of Minneapolis-based Career Planning Resources, said smart companies work hard to keep their internship programs, even in a down economy. "It is going to bounce back at some point," he said. "The employers who maintain their internship programs are the ones who are going to land the best graduates."

Meanwhile, on the Sun campus, even freshly minted M.B.A.s are clinging to their internships, hoping to parlay them into full-time jobs. Pamela Kong, a 29-year-old who just received her master's from Santa Clara University in June, has had her internship at Sun extended twice over the past year. It ends this month, but she's eager to stay on at the company. "I keep telling my manager, 'Help me find a job because I want to stay with Sun.'"

Kong, who was laid off from an engineering position at another company two years ago, said she likes both her job and the company--especially because she's surrounded by so many smart people. "I don't think I've run into one person I would call an idiot," Kong chuckled, gazing around the Sun campus during a recent barbecue for interns.

Plus, the work is challenging, partly because of the economic doldrums. "There's more work for an intern to do," Kong said. "We're getting pretty meaty projects."

Santhanam, the former Solectron engineer, agreed. He said he participates in meetings and gives feedback about product strategy and pricing. He thinks his manager listens to him because of his experience in the engineering field. Occasionally, though, he does have to do some grunt work such as printing out slides for meetings.

But the company makes up for it by treating interns like employees, giving them badges that are identical to other workers and letting them rub elbows with top executives. Last week, he said, jeans-clad CEO Scott McNealy was milling about on the Sun campus during lunch. "It's like meeting Barry Bonds," he said.