Encad, Hewlett-Packard
Settle Their Differences
Bad news in the form of job cuts hit the local cyber-world recently, and it was interesting to see how some companies handled the situation.
Some divulged the information, providing the number of people laid off, the types of jobs lost and reasons for the layoffs. Others took the duck-and-cover approach to dealing with bad news, merely confirming a figure that was already reported and making no further comment.
And then there were others who simply released a prepared statement that didn’t provide any numbers on lost jobs and offered only a vague explanation about why the cuts were made.
All the Internet companies are relatively new and have enjoyed mostly positive press due to their fast growth and potential profitability.
At SpinRecords.com, a Carlsbad-based firm that runs an E-commerce Web site and produces music CDs, 34 jobs were cut from the payroll resulting in a staff of 70, said Patty Regan, vice president of communications of the company that is about a year old.
“We’ve streamlined the company and had to reduce the staff. We took a little bit from every department,” Regan said. Areas where cuts were made included artists and repertoire (A & R;), editorial and project managers, she said.
At RealAge.com, a Sorrento Valley firm that operates a Web site that provides health information, 15 people lost their jobs in April.
Charles Silver, president of the 4-year-old company, refused to comment, except to confirm a previously reported figure on the layoffs.
“It’s hostile waters right now, so it does us no good that we come out with a story like this,” Silver said.
The response from CollegeClub.com was even more evasive. The company merely released a statement saying they reduced staff, but gave no numbers nor particulars.
The statement said current market conditions required “a quicker path to profitability,” and that the company “found it necessary to reduce its work force.”
Asked follow-up questions about jobs and the business, spokeswoman Jo Jo Platt said the company was in a “quiet period” before its initial public offering and was prevented from saying anything more.
CollegeClub.com, which operates a Web site targeting college students, had 255 employees as of last month when it filed its S-1 statement with the SEC in a quest to raise $85.2 million. The statement revealed it has never made a profit since its founding five years ago, and lost $25.7 million last year.
The negative news is no surprise to veterans in the high-tech industry, who say a massive shakeout of underperforming and money-losing businesses is under way.
“I think we’re just seeing the tip of the iceberg,” said Peter Shaw, a high-tech consultant and former president of Sitematic Corp.
Shaw said over the next several months, more of the existing, dot-com firms losing money will be forced to tighten their budgets by laying off staff, or taking more drastic measures.
Start-up firms looking for venture capital will find the markets less receptive, he added.
“Unless they can show up-front how they have a viable business model that will result in profits in a short time, they will not be funded,” Shaw said.
As to the reaction by some companies to be less than forthcoming about the layoffs, Shaw said it’s not a good policy over the long term.
It’s always better to be more open about business developments, even if they may be negative, because that builds credibility when a company releases positive news, he said. “You have to learn how to manage through the bad times as well as the good,” Shaw said.
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Encad Settles With H-P: Encad Inc., the San Diego maker of large format color printers, settled a long-running legal battle with Hewlett-Packard Co.
Under the agreement all outstanding litigation between the firms related to patent infringement and pricing issues were terminated. Encad also said the agreement gives both companies the option to cross license future products.
Encad Chairman and CEO David Purcell said details of the settlement cannot be disclosed by the court agreement, but it was a positive development.
“We’re glad to cease hostilities and to begin working with Hewlett-Packard,” Purcell said. “This will allow us to put more focus on the company’s business rather than on legal issues, which makes us happy but probably doesn’t make our lawyers too happy.”
Founded in 1981, Encad developed one of the first large-format inkjet color printers and is a competitor to H-P, which claims to have 70 percent of the market. Encad employs about 430 people at its Kearny Mesa facility and sells its products in 67 countries.
Encad reported a loss of $2.4 million on sales of $22.8 million for its first quarter, compared with a net profit of $349,000 on sales of $28.9 million for the like period last year. It had about $117 million in sales for all of 1999. Its stock, traded on Nasdaq, was trading below $4.
State High-Tech Boom: When it comes to job creation in high-tech, nobody does it better than California, which added more than 193,000 new jobs in the field from 1993 to 1998, according to a recent study by the American Electronics Association.
The increase pushed the state’s employment in this area to nearly 835,000, or twice as many as the second place state, Texas. Total payroll for these jobs was $56 billion.
Here, the San Diego Regional Chamber of Commerce estimates there are 129,000 local jobs in high-tech, which includes defense and aerospace as well as telecommunications, information technology, computers and software, and electronics.
The AEA report, called Cyberstates, said the average salary for high-tech workers in California was $67,000 in 1998, which sounds great but was only No. 3 in the nation. No. 1 was Washington state at nearly $106,000 and New Jersey at nearly $69,000.
Among the many interesting facts in the report:
– California high-tech firms lead the country in attracting $16.9 billion in venture capital last year, or nearly half the entire U.S. total of $35.6 billion;
– California led the nation in high-tech exports last year with $53 billion, more than double the amount exported by Texas, the second place state;
– Total U.S. high-tech employment, which is 5 million, increased by 1.2 million from 1993; every state gained jobs in this industry between 1997 and 1998;
– The fastest growth segment nationally in high-tech is technology services, where 3.1 million workers are employed, or 1.1 million more than in high-tech manufacturing.
E-mail items for Allen’s Cyberbucks column to mallen@sdbj.com.
