By Phil Goldstein
Last week the U.S. economy marked a major milestone: The official unemployment rate dipped to 5.9 percent, the first time it has been below 6 percent since the summer of 2008.
Indeed, some companies in the wireless industry that shed thousands of jobs in recent years are now on the mend. For example, BlackBerry (NASDAQ:BBRY) CEO John Chen said earlier this summer the company has finished its three-year-long restructuring efforts as it seeks to refocus on the enterprise market, and would begin targeted hiring. Additionally, Alcatel-Lucent (NYSE: ALU) has seen its finances recover after announcing more than 15,000 job cuts in the past three years.
Despite those improvements, continued shifts in the mobile market have forced thousands of workers out of their jobs this year. Reason vary: Some companies are getting out of businesses where they have been unable to make headway--such as Ericsson's (NASDAQ: ERIC) recent decision to exit the wireless-modem business and cut around 1,000 jobs--while others are cutting jobs simply to improve their balance sheets.
Abelian Research analyst Charles Golvin, a longtime tech and wireless analyst, said each business that has made large cuts this year did so for unique reasons. For example, he said, network vendor Cisco cut thousands of employees mainly because "the service provider infrastructure equipment business is, I think, in a pretty rough state of flux right now." He noted that Network Functions Virtualization (NFV) technology is shaking up the traditional network gear business model and "the business of selling proprietary gear is looking real sketchy at the moment."
As for Microsoft (NASDAQ: MSFT) and Broadcom, both of which are cutting jobs, Golvin said they are making shifts away from businesses in which they can't make much of a profit. Microsoft is moving away from feature phones following its purchase of Nokia, and Broadcom is retreating from the baseband chip market.
The job cuts that Sprint (NYSE: S) is making this year come with a "greater sense of urgency," Golvin said. "In terms of the competition in their business, they have really struggled the most," he said. "They have seen T-Mobile really race ahead and gain a lot more customer mindshare."
Ericsson – 1,000 jobs
It was a long time in coming, but in mid-September Ericsson (NASDAQ: ERIC) said it would be getting out of the wireless-modem business and will most likely slash around 1,000 jobs as a result. Ericsson was facing too many hurdles in the stand-alone-modem business as device makers increasingly chose to go with system-on-a-chip solutions, with modems married to application processors, which Ericsson does not offer.
Ericsson's move was not totally a surprise: The Swedish networking vendor had said it would evaluate the future of its modem unit within 18 to 24 months of taking over the ST-Ericsson modem business in 2013.
ST-Ericsson, and later Ericsson, faced a number of obstacles in modems, especially when competing with a colossus in modems like Qualcomm (NASDAQ:QCOM). According to research firm Strategy Analytics, Qualcomm dominated the cellular baseband market in the second quarter with 68 percent revenue share, followed by MediaTek with 15 percent revenue share and Spreadtrum with 5 percent share. Marvell and Intel rounded out the top five.
Ericsson CEO Hans Vestberg told Reuters the company will move around 500 modem workers into Ericsson's R&D efforts in radio networks, especially within small cells, energy efficiency and M2M.
Vestberg told Bloomberg that pricing pressure on the modems business was "enormous."
"In order to have the next generation of modems you would need to pour in even more R&D spending," he said. "We came to the conclusion that we're going to have a tough time to really see that we are going to succeed in the modems business."
Broadcom – 2,500 jobs
In July Broadcom said it would cut 2,500 jobs, or about one-fifth of its total workforce, as part of a winding down of its cellular baseband chipset unit.
The cuts came after the company had said in early June it was exploring whether to sell off or wind down its baseband business, an acknowledgement of the difficulties it has had in challenging the dominance of Qualcomm (NASDAQ:QCOM) in the baseband market.
"We made the decision to pursue a wind down, which minimizes the ongoing losses from the business, and enables us to focus on our core strengths that much more quickly," CEO Scott McGregor said on the company's earnings conference call after the news.
Broadcom had laid off 250 sales and administrative employees when the cuts were announced, and expects to cut another 2,250 employees globally as part of the winding down of the baseband unit. The company plans to close or consolidate 18 locations and end certain existing contracts.
As it moves away from basebands, Broadcom plans to focus on other businesses, including set-top boxes and modems for home broadband connectivity; small cells; chips for network infrastructure and data centers; and the Internet of Things and wearables.
Sprint – 5,000 jobs
From Jan. 1 through Sept. 30, Sprint (NYSE: S) has cut around 5,000 employees, according to spokeswoman Jennifer Schuler.
In January Sprint said it would book a $165 million charge related to job cuts, but at the time did not reveal how many employees it planned to cut as part of a restructuring. Then in March Sprint disclosed it would cut at least 1,400 jobs across the country, and perhaps more, as it closed call centers, slashed jobs related to refurbishing phones and shut down underperforming retail stores.
Specifically, Sprint earlier this year shuttered three customer care call centers and cut back operations at three others. Sprint also cut 330 technical consultants, shuttered 150 service and repair centers across the country and shut down 55 of its worst-performing retail stores.
"While some of [the 5,000 cuts are] related to previously announced reductions, primarily in customer care, retail and business sales, this change has also come from the transition of employees to Sprint vendors and normal workforce attrition (that has not been backfilled)," Schuler said recently.
However, Schuler noted that across Sprint's business it currently has around 2,500 job openings. She said it is difficult to break down the carrier's employee losses so far this year by specific job functions, but noted that Sprint has closed lower-performing retail stores and shifted workers in business sales. Schuler also said that at a call center in Charlotte, N.C., Sprint transitioned employees to Xerox, and at a facility in West Salem, Wisc., Sprint transitioned employees to the vendor Teleperformance.
Additionally, it appears that Sprint will likely cut more jobs, though it has not specified how many. In a filing with the Securities and Exchange Commission, Sprint said it is cutting jobs to, among other things, "improve operational efficiencies and reduce costs." Sprint said the cuts are going to be largely complete by Oct. 31 "and will include certain management and non-management positions."
Sprint spokesman Scott Sloat told Bloomberg the cuts will affect employees in IT, network and technology who had been working on the company's Network Vision network modernization project. "Since Network Vision is largely complete, we are staffing accordingly," Sloat said.
Sprint CEO Marcelo Claure, who took over the top position at the carrier from Dan Hesse in mid-August, hinted in September that cuts would be coming. "In a time of a turnaround, which is Sprint, we are going to focus only on must-haves, all the nice-to-haves are going to go," he said at an investor conference, according to a Seeking Alpha transcript of his remarks. "And I can tell you that we have a pretty extensive list that the company has accumulated of nice-to-haves and also the first that are going to go."
Cisco – 6,000 jobs
Networking giant Cisco said in August it would cut around 6,000 jobs, or 8 percent of its workforce, as it forecasted weak growth going forward. The latest cuts came after the vendor announced 4,000 job cuts in August 2013, 1,300 in July 2012 and 6,500 in 2011. Cisco said it expects to record pretax charges of up to $700 million to cover the costs of its latest restructuring.
In an interview with the Wall Street Journal when the new cuts were announced, Cisco CEO John Chambers said the cuts were designed to let workers with different kinds of skills into the business rather than cutting total costs. He said the company is focused on adding jobs in parts of the business that are growing, like its cloud operations.
"We will exit this year pretty much with the same number of people we started the year with," Chambers said. "Some groups will not be affected at all. Others will."
Cisco said it plans to add jobs in areas that include its data center, software, security and cloud offerings. Chambers declined to say which units will be hit hardest by the latest cuts before workers are notified, but told the Journal examples could include sales representatives in countries where sales are falling.
The feelings inside Cisco were apparently raw after the latest cuts were announced. According to Business Insider, when asked by an employee during a company town hall meeting if annual layoffs at the end of Cisco's fiscal year have become the "new normal," COO Gary Moore said he hoped not. Citing audio of the meeting posted online by Cisco blogger Brad Reese, the report said that Moore stressed that Cisco would like managers of declining business units to trim staff throughout the year so that Cisco can "make room" for employees it wants to add. "We need to as leaders see that and make room, not in a yearly, annual restructuring," More reportedly said. "It's just a wrong way to do it."
Cisco declined to comment, according to Business Insider.
Microsoft – 18,000 jobs
When Microsoft (NASDAQ: MSFT) CEO Satya Nadella took over from Steve Ballmer in February, there were some who braced for big changes. The new chief took several months to get a handle on how Microsoft's different businesses were working together and to formulate his own vision for the future of the software giant.
In mid-July, Nadella laid out a lengthy manifesto for the company to move beyond the "devices and services" mantra supported by his predecessor Steve Ballmer and into an era where the software giant focuses on "productivity and platforms."
While Nadella did not specifically indicate that job cuts would be a part of the transformation in Microsoft, he indicated they might be. "Every team across Microsoft must find ways to simplify and move faster, more efficiently," he wrote. "We will increase the fluidity of information and ideas by taking actions to flatten the organization and develop leaner business processes."
The axe fell a week later.
Microsoft said it would cut up to 18,000 jobs this year, or 14 percent of its workforce, in its largest round of job cuts ever. Many of the cuts were Nokia (NYSE:NOK) employees the company acquired when it bought Nokia's devices and services business for around $7.4 billion in a deal that closed in April. Indeed, Microsoft said it would lay off 12,500 professional and factory positions "through synergies and strategic alignment" of the Nokia business.
Microsoft expects the cuts to be substantially complete by year-end and fully complete by June 30, 2015. The software giant said it expects to incur pre-tax charges of $1.1 billion to $1.6 billion over the next four quarters. Nadella said that Microsoft would be cutting jobs but also would be adding other jobs in "certain other strategic areas."
Before Microsoft acquired the Nokia phone business, Nokia had already cut tens of thousands of jobs under the leadership of Stephen Elop, who is now back at Microsoft as an executive vice president in charge of the company's devices business. "It is particularly important to recognize that the role of phones within Microsoft is different than it was within Nokia," Elop added in a memo to employees. "Whereas the hardware business of phones within Nokia was an end unto itself, within Microsoft all our devices are intended to embody the finest of Microsoft's digital work and digital life experiences, while accruing value to Microsoft's overall strategy. Our device strategy must reflect Microsoft's strategy and must be accomplished within an appropriate financial envelope. Therefore, we plan to make some changes."
Some of those changes include a decision to stop making future Android-based Nokia X phones. Nokia X phones run on a forked version of Google's (NASDAQ: GOOG) Android platform.
After it laid off 13,000 employees in July, Microsoft cut 2,100 employees in September. As a result of the second round of cuts, Microsoft also said it would close its Silicon Valley research-and-development lab, though the company still has around 1,000 scientists and engineers around the globe developing new products.