Silicon Valley faces slowest week in slow economy

Peter Henderson

SAN FRANCISCO: Silicon Valley faced its slowest week since the US economic

downturn began, as major technology firms sent staff home for an extended July 4

holiday, to turn off the lights and save money.

With so many companies asking - or telling - workers to take the entire week

off, local restaurants were quiet, the familiar freeway traffic jams were gone

and the pace of work among those left was slowing visibly by Tuesday. Network

computer maker Sun Microsystems Inc. sent most employees home for four work days

this week, which includes the July 4 holiday.

Computer storage maker Network Appliance Inc., Web software publishing firm

Adobe Systems Inc. and chipmaker Xilinx Inc. also sent staff on holidays.

"This is one of the nicest weeks to commute to the Valley, beautiful

weather, extra seats on the train and less cars on the street," said Jim

Shissler, public relations manager for Palo Alta-based AltaVista.

Others left behind as business wound down in Silicon Valley were less

enthusiastic.

"Going to work feels a little bit like being in a minimum security

prison," said an employee of a tech hardware company. "I have to be

there, but there's not much to do." To avoid layoffs, some Silicon Valley

companies have taken unusual cost savings measures such as mandatory Fridays off

without pay this year. This week a number shut down altogether, saving salaries

and the other costs of keeping the cafeteria open and the lights on.

Analysts and executives said the cost-saving steps should leave technology

companies with some room to maneuver when the economy hits bottom or begins to

improve. "You don't leave yourself without flexibility," said T.R.

Reid, spokesman for Dell Computer Corp., which told many middle-and

upper-managers to take off five, unpaid days this quarter.

"Cost cutting is at the top of the agenda. On the other hand, there are

some companies that simply don't want to be scaling back so much that they won't

be prepared for when the recovery does happen, so it definitely is a balancing

act," said Daniel Kunstler, a JP Morgan analyst.

The subdued climate in Silicon Valley marks a turnaround from a year ago,

when some eager dot-com employees routinely worked 90-hour weeks and many worked

right through holidays.

Intel begins warms down



Last week, leading personal computer microchip maker Intel Corp. slowed
operations at an Oregon plant, in what the company called a "warm

down" that will run until next week. The three top personal computer makers

have all told employees to take time off, although terms vary. Compaq Computer

Corp asked workers to use accrued vacation.

Dell has told employees to take five unpaid holidays of their choice this

quarter. Hewlett-Packard has asked employees voluntarily to take off eight days

of their choice, or a 10 percent pay cut, on top of six days the company earlier

asked employees to take in the next four months.

Technology companies and investors have been looking for confirmation that

demand and corporate investment will stabilize or improve in the second half of

the year. Many executives have pushed back hopes for recovery to 2002 and see,

at best, a stable six months ahead.

Stability at least would let companies more accurately plan for profitability

and avoid more painful cost cutting. Two days after the HP program was

announced, 33,000 of approximately 90,000 employees had responded to requests in

the global cost-cutting program, and 96 percent had agreed to participate,

spokeswoman Rebeca Robboy said.

But the threat of more job-cuts, on top of about 5 per cent cuts made this

year, has not gone away. "Among the long-term actions we are looking at are

severance programs that address performance issues" and skill balancing,

Robboy said.

(C) Reuters Limited 2001.