By Phil Goldstein
As FierceWireless noted in its recent U.S. LTE snapshot, U.S. wireless carriers are expected to spend well over $20 billion on wireless capital expenditures in 2013 alone as they continue their LTE deployments and modernize their networks. Money is sloshing through the economy as a result of that spending, trickling down to vendors, handset makers and other ecosystem partners. However, that does not mean that all is healthy in the wireless economy. Many companies have been cutting jobs in 2013 as a result of restructuring and downturns in their businesses.
Looking back at the five largest wireless industry job cutters from 2012, there is a remarkable continuity in the companies that have announced major layoffs this year. Alcatel-Lucent (NASDAQ: ALU), which cut close to 5,500 jobs in 2012, just recently announced a massive new round of job cuts as part of its "Shift" restructuring plan. BlackBerry (NASDAQ:BBRY) said it would cut fully 40 percent of its workforce as it tries to go private and regain its footing. Google (NASDAQ:GOOG) continued to retool its Motorola Mobility division ahead of Motorola's release of the Moto X smartphone.
John Challenger, CEO of Challenger, Gray & Christmas, a major outplacement consulting firm, said that the job cuts reflected intense competition some firms are facing and a loss of major orders from customers. "As their order flows slow, their revenue flow is reduced," he said. "They hire or let go people."
Challenger noted that firms such as Alcatel-Lucent are revamping operations to focus on growth areas, and do not need as many employees as they did in the past.
Recon Analytics analyst (and FierceWireless contributor) Roger Entner was more blunt, and said the major job cuts the industry has seen so far this year are repercussions of poor business decisions by the companies' management. "If I see thousands of people laid off I always say the company leadership messed up," he said. "Because this should have been a gradual shift and not a series of tremors. It should have been very smooth."
Wireless carriers have also not been immune to job cuts. Sprint (NYSE:S) said in August it would cut around 800 customer service jobs nationwide and then later confirmed it laid off 75 percent of Clearwire's pre-acquisition workforce. T-Mobile US (NYSE:TMUS) in April confirmed job cuts at its headquarters in Bellevue, Wash., after weeks of refusing to acknowledge the cuts, but the carrier did not specify how many jobs were culled.
Still, Entner noted that public companies are required by law to publicly declare when they are cutting 1,000 or more jobs, but not when they are hiring. He said the LTE network buildouts have spurred enormous job creation this year. "T-Mobile covering 200 million POPs with LTE in 10 months is not done by the Three Stooges," he said. "It's done by an army."
Google/Motorola – 1,200 jobs
The paring down of Motorola Mobility continued into 2013, as in March its new owner Google (NASDAQ:GOOG) cut around 1,200 more jobs, or 10 percent of its workforce. Motorola continues to restructure and find its identity inside the search giant.
The layoffs came on top of the 4,000 job cuts Motorola announced in August 2012, which amounted to 20 percent of the company's workforce. The new job cuts affected employees in the U.S., China and India. "These cuts are a continuation of the reductions we announced last summer," Motorola said in a statement in March. "It's obviously very hard for the employees concerned, and we are committed to helping them through this difficult transition."
As the summer faded, analysts took stock of the unit. Since Google finalized its $12.5 billion purchase of Motorola in May 2012, the company had slashed more than 10,000 jobs to focus on fewer devices.
Indeed, Motorola revealed in late May that it would release a flagship smartphone over the summer called the Moto X, the actual name of the long-rumored "X Phone." The Moto X would be part of a series of new smartphones meant to reinvigorate the brand, according to Motorola CEO Dennis Woodside. In a bit of bright news from a jobs perspective, Woodside said the company would employ 2,000 people in a 480,000-square-foot facility in Ft. Worth, Texas, that used to manufacture Nokia (NYSE:NOK) phones, to build the Moto X.
As the Moto X was unveiled in August, Woodside, who formerly ran Google's advertising sales business in the Americas, said his directive has been to take Motorola "back to the roots of innovation and build devices that have the potential to change people's lives."
Motorola said in September it was shipping 100,000 of its new Moto X phones weekly from the Ft. Worth factory, which is operated by contract manufacturer Flextronics, though not all of those phones were necessarily sold to end customers. Woodside told Reuters the factory was capable of producing "tens of millions" of phones a year but expansion depended on demand. He also said the factory's production schedule of 100,000 units per week was only the first phase of a larger plan.
Ericsson/STMicroelectronics – 1,600 jobs
In March, the long, slow demise of ST-Ericsson finally came to an end. Parents Ericsson (NASDAQ:ERIC) and STMicroelectronics agreed to shut down their unprofitable chipset joint venture and split up its assets, cutting a net of 1,600 jobs. The parent companies reportedly tried and failed to find a buyer for the JV.
Under the split, which was finalized in August, Ericsson agreed to take on the design, development and sales of the joint venture's LTE modem products, including 2G, 3G and 4G multimode modems, and hired around 1,800 workers. STMicro agreed to take on existing ST-Ericsson products other than LTE modems, along with related businesses and certain assembly and test facilities, and hired 1,000 workers.
Despite the parents' best efforts to salvage the JV, it seemed by early 2013 that its breakup was inevitable. A the time the split was announced, the firm had racked up $2.7 billion in net losses since 2009. ST-Ericsson's fortunes truly started to wane as sales of Nokia's (NYSE:NOK) legacy Symbian smartphones declined and it shifted to Microsoft's (NASDAQ:MSFT) Windows Phone platform as its primary smartphone operating system. Nokia had long been the silicon vendor's largest customer, and Nokia's Lumia Windows Phones ran exclusively on chips from Qualcomm (NASDAQ:QCOM).
Cisco – 4,000 jobs
Cisco Systems has been on a mobile acquisition streak for pretty much the last year. In September 2012 the vendor acquired Wi-Fi analytics firm ThinkSmart Technologies. In November 2012, Cisco bought Wi-Fi and cloud networking vendor Meraki for $1.2 billion, and said the deal will allow it to continue to move toward a world where it offers more software-centric networking solutions for carriers and service providers. About a month later Cisco jumped into the policy control and solutions game and snapped up BroadHop. About a month after that, in January, Cisco agreed to pay $475 million to buy an Israeli mobile networking startup, Intucell, that specializes in self-optimizing network (SON) software. And finally, in April Cisco said it would buy small cell firm Ubiquisys in a deal valued at $310 million.
Jared Headley, Cisco's senior director of service provider mobility product and solution marketing, recently said the company has been busy combining these companies and their products into integrated solutions for carriers, tailoring them each for specific use cases. "We're not going to throw them all together and make a bad tasting soup," he said.
However it tastes, it seems Cisco is going to be eating a lot more mobile soup moving forward. In August the company said it would cut 4,000 jobs, or about 5 percent of its workforce, as the networking vendor said it faced uncertain demand for its gear and services in many markets.
The cuts come despite the fact that Cisco reported a jump in net income of 18 percent for its fiscal fourth quarter, to $2.27 billion, up from $1.92 billion a year ago. Revenue increased 6 percent, to $12.42 billion, up from $11.69 billion.
"The environment in terms of our business is improving slightly but nowhere near the pace that we want," CEO John Chambers said on the company's earnings conference call, a sentiment he echoed multiple times.
Chambers said "a fair amount" of the 4,000 jobs being cut "will be allocated to new growth opportunities," including mobile equipment, data centers, cloud computing and software markets.
"We're bringing advanced software and management tools to carriers that will enable them to lower operating cost and drive efficiencies around their overall network spend," Chambers said on the call. 'We believe our internal innovation coupled with the recent acquisitions of BroadHop, Cariden, Intucell and Ubiquisys position us to be the clear No. 1 in this mobile market over the long run."
BlackBerry – 4,500 jobs
Heading into 2013, the situation for BlackBerry (NASDAQ:BBRY) was tense. The firm had already cut 7,000 employees over the previous two years as it lost market share and tried to modernize its operating system using software it acquired from QNX. The late-January unveiling of its BlackBerry 10 platform (which had been delayed) got off to a somewhat bumpy start when the company said the first BB10 phone, the touchscreen Z10, would not hit the U.S. until March at the earliest.
The U.S. launch did eventually happen in March, and though the company reported that in its fiscal fourth quarter, which ran until March 2, it sold 1 million Z10 units, it also said that its subscriber base fell to 76 million, down from 79 million at the end of the previous quarter and 80 million the quarter before that. Sales failed to pick up materially as the spring went on, with the debut of the Q10 smartphone, which has a physical keyboard, pushed out longer than expected. BlackBerry said it sold 6.8 million smartphones in its fiscal first quarter, which ended June 1, up from 6 million in the fiscal fourth quarter but down from 7.8 million in the year-ago period. The company said it shipped 2.7 million BlackBerry 10 devices in the quarter, but did not provide sell-through figures.
In July, during the firm's annual investor conference, BlackBerry investors angrily questioned CEO Thorsten Heins about its difficulty penetrating the U.S. market with BlackBerry 10. By late August, the company's board said it had formed a special committee to explore "strategic alternatives," including a possible sale. Shortly after reports indicated that a handful of private equity firms and other potential bidders were circling the company with tepid interest, the firm announced it would slash 4,500 jobs, or 40 percent of its workforce, as it posted a $965 million loss for its fiscal second quarter, mainly a writedown of unsold Z10 inventory.
Although BlackBerry issued an open letter to customers and partners around the world, assuring them that the company is "here to stay," the firm has announced a retreat from the consumer smartphone market, is trying to go private in a $4.7 billion deal with its largest shareholder, and its future is anything but certain.
Alcatel-Lucent – 10,000 jobs
Alcatel-Lucent (NASDAQ: ALU) CEO Ben Verwaayen announced in February he would step down from the struggling network equipment vendor. The news essentially put a period on Verwaayen's attempts to turn around Alcatel-Lucent in the highly competitive network infrastructure market. The company has posted losses every year since it was formed in 2006, and Verwaayen's cost-cutting program, which included 5,500 job cuts in 2012, did not turn around the firm.
Shortly thereafter the vendor named Michel Combes, a former CEO of Vodafone Europe, as its new CEO, charging him with returning the company to consistent profitability. Combes came into the job with a reputation as a cost cutter and a turnaround specialist.
After reviewing the company's business, in mid-June Combes unveiled a major new restructuring of the firm's business focus and balance sheet, called the "Shift" plan. He said the company would become more of a specialist by focusing on several core areas in IP networking, and in wireless it will put more emphasis on LTE and small cells and move away from investing in legacy technologies. At the time, the company did not specify how many job cuts the plan would entail.
Then in October the vendor brought the hammer down and announced 10,000 additional layoffs. Alcatel-Lucent said the 10,000 job cuts will be worldwide and will occur by the end of 2015. All geographic areas where the company operates will be impacted, with the reduction of 4,100 jobs in Europe, Middle East and Africa, 3,800 in Asia Pacific and 2,100 in the Americas. By the end of 2015, Alcatel-Lucent said it will halve the number of its "business hubs" globally.
Even as labor unions and the government in France protested the moves, Combes warned that the company is facing a dire situation and that its recently announced job cuts and restructuring moves are necessary to keep the vendor afloat. "This company could disappear," Combes told Europe 1 radio. "This company hasn't made money since 2006." Combes acknowledged that "the company and its employees are going through a difficult period."