Despite the brief moment of lifting hopes on the news of rising stock indexes Thursday, all was back to gloom and doom by the time the markets closed, with the same rumbles of layoffs and financial warnings that shook the technology industry in the first quarter of the year.
"There is an overall pause and hesitation to spending right now," said Seth Spalding, a San Francisco-based financial analyst with Epoch Partners. "There was a lot of spending in previous quarters in anticipation of accelerated growth."
But that accelerated growth has turned to layoffs and restated earnings for many, and it could take another six to nine months of "inventory correction" for these companies to turn around, Spalding said.
"The market might turn to lows for a while," Spalding said. "People just don't know when it's going to uptake, but they want to stay safe in terms of not missing it again."
One of the disappointments for the day was PC giant Dell Computer Corp., which reiterated that it is only expecting US$8 billion in sales for the first quarter of the year, down from the $8.7 billion Dell posted in the previous quarter. "This uncertainty and the implications it has in our industry is why we're not giving any guidance beyond this quarter," James Schneider, vice president and chief financial officer said in a conference for trade and financial analysts. Dell's revenue and earnings targets are in line with the consensus of analysts polled by First Call/Thomson Financial.
Palo Alto-based Agilent Technologies Inc., which spun off from Hewlett-Packard Co. in 1999, announced Thursday that because of "recent slowing in customer demand," the company would temporarily reduce employee pay by 10 percent. In addition to the pay reductions, the company has also announced a hiring freeze, a significant reduction in temporary workers and consultants, dramatically reduced spending on items such as office equipment, and limited travel to customer-related activities. Ned Barnholt, Agilent's president and chief executive officer said in a statement that the company views the current slowdown as a business cycle, and the moves were made to "avoid across-the-board layoffs."
The pay reductions, which began April 1 for 2001 senior managers, and will begin on May 1 for the rest of the company's estimated 48,000 employees, are expected to save about $70 million per quarter. The pay cuts are expected to last into the third quarter, although the company may extend them into the fourth quarter.
Agilent is also reducing its production schedules for incoming orders, which may result in short-term closures, as well as time-off programs. The company also warned that its second quarter, which ends April 30, would be worse than previously expected.
Winstar Communications Inc. said it would cut its staff of 4,400 by 44 percent, according to a report by Dow Jones. The move would affect positions throughout the company, but primarily positions in the area of network expansion, the report said.
Optical Networking software vendor Sycamore Networks Inc. also said Thursday that its quarterly revenue and earnings would be worse than expected for the third quarter, which ends April 28. Sycamore now expects revenue for the quarter to be between US$50 million and $60 million. The company also expects to report a pro forma loss of between $38 million and $45 million for the quarter, excluding amortization of deferred stock compensation, payroll taxes on stock option exercises and restructuring charges, the company said in a statement.
In comparison, for the third quarter last year, the company reported pro forma net income of $11.7 million, on revenue of $59.2 million. The company also anticipates a restructuring charge of between $140 million and $150 million, and laying off 140 employees.
Software and consulting company NetGenesis Corp. also lowered its earnings forecast Thursday, for the quarter ending March 31. The company now expects to report revenue of between $3.3 million and $4.3 million, and a pro forma net loss of between $11.5 million and $12.5 million for the quarter, the company said in a statement.
The company will also reduce expenses to fit the expected loss by laying off 15 percent of its workforce and consolidating corporate facilities, resulting in a restructuring charge for the second quarter. NetGenesis' CEO Larry Bohn said in a statement that the disappointing results stem directly from a dramatic downturn in U.S. IT spending. Cambridge, Massachusetts-based NetGenesis expects to report earnings for the quarter on April 26.
Toronto-based CRM (customer resource management) vendor Delano Technology Corp. announced that it expects to report revenue of $7 million for the quarter ended March 31. However, the company also expects to report a loss of between $0.36 and $0.38 per share. This compares for the previous quarter, ended Dec. 31, 2000, when the company posted revenue of $9.3 million and a net loss of $9.3 million. Delano also announced it will lay off 15 percent of its workforce, leaving it with 420 employees.
However, there was one company which expects to exceed its fourth quarter expectations. Enterprise systems management company BMC Software Inc. plans to report revenue between $412 million and $422 million, due to an increase in license revenue. The company expects to report fiscal 2001 revenue of between $1.49 billion and $1.5 billion.
But on the down side, BMC is laying off 6 percent of its 7,300 employees to cut down on expenses. The resulting separation packages will result in an estimated $14 million restructuring charge in its June quarter.