While economists this week found some heartening signs of an upturn in the US marketplace, the IT industry continued to suffer. Hewlett-Packard's CEO Carly Fiorina illustrated the mood with comments she made while launching a range of new mobile computing products at the CeBIT trade show in Hanover.
"We are not optimistic that Europe will be immune from the economic slowdown or that there will be a quick recovery in the second half of 2001, as some had predicted," she said. "During this downturn we have seen revenue growth slow from 15 per cent in 2000 to about two per cent in the first quarter of this year. We are not assuming any improvement throughout the rest of the fiscal year. It is like navigating through a thick fog."
The warning was backed up by the actions of other companies in North America. Nortel again set a gloomy tone when it warned that its first quarter performance will not be up to scratch and it will lay off a further 5000 workers. Nortel now expects its revenue for the quarter to slump to about $US6.1 billion, some $US200 million shy of a previously revised forecast, which is likely to blow its loss out from about four cents per share to 12 cents per share. In making its previous revision in February Nortel had said it would eliminate 10,000 jobs.
Oracle was also affected by the rationalisation bug and announced that it will retrench almost 900 workers as it cuts its total workforce by up to two per cent. "With the sole exception of R&D, Oracle should constantly be reducing head count in every area," noted Larry Ellison, Oracle's CEO.
The cuts were not so light on at Motorola, which will cut a further 4000 from its networks sector business, bringing the number of positions the company has either eliminated or outsourced in the past six months to 20,000. Just 10 days earlier the company had announced it would cut 7000 positions in its personal communications sector because of continuing deterioration in the mobile handset market.
Then out of the gloom came a profit for Palm, although it too was accompanied by gloomy forecasts and cost reduction plans. In its third quarter, which closed on March 2, Palm lifted revenue 73 per cent to $US470.8 million and made a net profit of $US9.3 million. The revenue jump was built on a 112 per cent increase in sales of the company's flagship handheld product, which is not expected to perform so well in the fourth quarter, according to Palm's CFO Judy Bruner. "The sudden change in our near term outlook has been jarring to us," she acknowledged. "We are clearly disappointed by the current business outlook."
At 3Com the news was very gloomy indeed as the company lost $US122.8 million in its third quarter on revenue that fell 18 per cent to $US629.6 million. The company, which is already in the middle of a restructuring program, announced that it will stop producing its consumer Internet appliance products, including the recently introduced Audrey device, and reduce the cost structure of its broadband modem business.
And it's difficult to know if this is good news or bad news, but Linux specialist Red Hat managed to reduce its fourth quarter loss from $US24.6 million a year earlier to $US24.2 million while more than doubling its revenue to $US27 million. After "adjustments" the loss was reduced to $US600,000, which compared favourably with a loss of $US5.6 million a year earlier.
And before we close we should mention that with all Australian eyes on Telstra's alliance partner Pacific Century CyberWorks, the Hong Kong company has turned in a shocker with a net loss for 2000 of more than $HK6.9 billion (about $A1.75 billion) on revenue of about $HK7.2 billion ($A2.8 billion). Losses on PCCW's basket of investments in Internet companies and the cost of loans to finance its acquisition of HKT hit the company hard.