Israeli tech slump cuts jobs, ends perks

By Albert Robinson

TEL AVIV: For Ronen, fired three months ago by an Israeli high-tech firm, the days of free lunches, weekly massages, company-paid weekends abroad and numerous other benefits are a distant memory. Working once again after a two-month job-hunt, Ronen, like some of the thousands of bleary-eyed, but high-paid workers fired this year as the global high-tech slump has forced Israeli companies to downsize drastically, has found work conditions have changed dramatically.

"Salaries are down and there definitely aren't any more free lunches, weekly massages or weekends in (the Red Sea resort city of) Eilat and abroad," said Ronen, not his real name, a software engineer working in Tel Aviv.

"One day I came into the office and the manager called me in and said I was out and asked if I could leave the premises within half an hour. He didn't say he didn't trust me (not to sabotage the computers or network) but that was the implication. This was a company I worked at for two years, frequently working 18-hours a day or more."

Although he counts himself lucky to have found a job since many of those in the same situation are still looking, he says it was not easy, having applied for 45 positions, and going through a grueling round of three interviews before being accepted by his current employer.

"My salary is about 15 percent lower, with no company car and none of the old perks like massages, free gym membership and weekends in Israel and Turkey. Maybe they'll bring them back when high-tech picks up," he said.

That could be a long way off since Israel's high-tech sector has been hammered in the wake of a global technology slump. Barely two years ago, when technology was the main driver of Israel's economy, the country was considered by many as the second-best tech centre behind Silicon Valley .

The boom in the 1990s enticed engineers and others from the United States, Europe, India and former Soviet Union states to move to Israel since jobs were plentiful, with high salaries and fantastic perks -- that despite work hours being long and hard. "I used to be proud of being part of Israeli high-tech, now I realise I was naive," said Ronen. "It's just a job and you don't have any value beyond what you are hired to do."

Ronen is one of the lucky ones, finding a new job relatively quickly, but the technology slump has helped to send unemployment soaring well above 10 percent. Among those cutting back are telecoms equipment maker ECI Telecom which recently said it will fire 220 staff. Media reports speak of up to 800 staff facing the axe.

Telephone billing software maker Amdocs is firing 1,000 employees while slashing sales and earnings targets. Gilat Satellite Networks, according to one report, aims to cut another 200 jobs after having reduced staff to 1,000 from 1,900 in the past 18 months. Comverse Technology Inc -- one of Israel's largest tech firms -- is cutting more than 20 percent of its staff, or around 1,200 jobs.

Maya, not her real name, who was one of those who received a redundancy letter this month, said the company had been "very fair" in its leaving conditions. "The redundancy pay is good, but the uncertainty of not knowing who would leave and who would stay was terrible," she said. "It could have been better handled. "The (jobs) situation is bad, even if you are well qualified and have lots of experience. I'm in my 30s and I don't think I'll have too much trouble, but many of the older people are desperate."

While many of the established and publicly-traded companies on Nasdaq may be able to weather the storm since they are flush with cash, start-ups dependent on private money are suffering heavily -- either closing or chopping staff and wages. InfinBand semiconductor start-up Mellanox, which raised $56 million in a third fund raising round in February, has just axed 67 jobs from its staff of 214 while cutting salaries for remaining employees.

The Israel Venture Capital (IVC) research centre estimates 200 start-ups have folded this year due to the high-tech slump with as many as 6,000 workers fired. The centre, which monitors start-ups and venture capital flows, says around 100,000 workers are employed by technology firms. The IVA predicts Israeli technology firms will attract no more than $250 million in venture capital this year compared with $1.4 billion last year and a record $3.7 billion in 2000.

With Israel's economy dependent on the high-tech sector, the slump has pushed Israel's economy into recession in the same way high-tech exports fuelled high growth in the 1990s. Unemployment was 10.5 percent in May, the last month for which data is available, from 9.0 percent a year earlier and is seen heading to an all-time high of 11.5 percent next year. That would translate into 300,000 jobless in a country of 6.4 million people.

Having contracted by 0.6 percent last year, the economy is forecast to drop another 1.0-1.5 percent this year with scant growth seen in 2003 as Israel struggles with an almost two-year Palestinian uprising that has pushed up defence costs. Indeed, government figures released this month show the economy fell an annualised 2.0 percent in the second quarter from the prior quarter. In the first half of 2002, gross domestic product fell 2.9 percent from the same period of 2001.

Tourism, construction and high-tech exports have been battered and foreign investors deterred by the security uncertainty. According to Ronen, the difficulty of finding work, the tension caused by the threat of daily Palestinian attacks and a tax burden of up to 60 percent could force many people to leave Israel and seek work elsewhere.

"Life is hard and jobs are difficult to find. Taxes are high and it's difficult to make ends meet even on a so-called good salary," Ronen said. "I know people who want to work abroad. And the way they feel now, they don't ever want to come back."

(C) Reuters Ltd.