Slowdown gulps 80,000 jobs in the Valley

Paul Swart

This is HUGE! 80,000 job cuts, i.e., one in every five high-tech jobs. The

impact is seen everywhere. Roads that were packed with traffic during the

morning and evening commutes a year ago are now congested in only a few

sporadic spots. House prices have begun to fall, as residents that depend on

two high-paying incomes to pay $300,000+ mortgages are desperate to sell,

while their homes are still worth more than what they paid for. Similarly,

almost every apartment complex is sporting vacancy signs and offering

attractive move-in incentives for the first time in years.

While there are usually many start-ups to absorb skilled engineers and

technicians laid odd by the big firms, the current wave of layoffs is far too

large for all to find new work in the short term.

And there are many additional layoffs still to come. The semiconductor

equipment sector, for example, is just getting to a point where lots of jobs

need to be cut to adjust for lower bookings. Companies like Sun, AMD and

others have avoided massive layoffs until now. But at some point these

companies may have to face the music if a turn around does not happen in the

next four to six months.

And if there is any further delay in the planned October 25 release of Windows

XP, for technical or legal reasons, hopes of any upturn in PC sales will go

out the window with it.

Of course the valley will come back as it always has. But for now, the arrow

in the economic pressure valve is moving into the red area. And with some

predictions that a high-tech rebound may not occur until 2003 or even 2004,

the lid may just blow off one of these days.

Will Microsoft win this war?

Deals that seem too good to be true almost always are! Microsoft proved that

this week by setting new restriction on what computer makers can put on the

Windows XP desktop. Clearly, Microsoft had no intention of letting a major

powerhouse like America Online make deals that dump the Internet Explorer,

MediaPlayer, MSN and other Microsoft products off the desktop. It remains

unclear how Microsoft could not have foreseen deals like the AOL-Compaq

alliance which pays Compaq $25 for every Compaq system sold with AOL as the

only Internet Service available on the Windows XP desktop.

Acting so swiftly shows Microsoft is either too desperate to give up control

of the desktop, or overly confident it has little to fear from the legal

process. Clearly the move is a slap on the face of those who were ready to

give the company the benefit of the doubt believe that a new kinder, gentler

Microsoft was emerging. One of the 18 states that sued Microsoft even made a

naive out of court settlement based on the company's willingness to let go of

its control over the desktop.

The move will likely harden legal positions and the appeals court will be much

less likely to overturn itself or even be willing to review its unanimous

ruling. An early indication of the legal implications could be a decision by

the appeals court to expedite the review of the punishment for Microsoft to a

new lower court judge, something Microsoft is strongly opposing.

The company wants Windows XP released before any of the courts have the

opportunity to block the release of the new software. If the new Justice

Department continues to pursue the case as strongly as it has so far, an

injunction request is certainly a possibility. If nothing else, a threat of

such injunction could help the government and the states secure a better

settlement.