Tech sector notes fewest job cutbacks in six years

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A resurgence in consumer technology spending and the expansion of Web 2.0 helped drive tech-sector job-cut announcements to the lowest quarterly total in nearly six years, according to global outplacement consultancy Challenger, Gray & Christmas Inc.

Job cuts in the tech sector, which encompasses telecommunications, computer, electronics and e-commerce, fell to 29,226, down 25.8 percent from 39,379 in the previous quarter. The second-quarter figure was the lowest since 26,583 job cuts in the third quarter of 2000.

The second quarter was 26.4 percent lower than the 39,720 job cuts announced during the same period a year ago. The 68,605 tech cuts announced in the first half of the year are 31 percent lower than in the same period of 2005, when 99,257 tech cuts were announced.

The decline in tech-sector job cuts this year mirrors a similar decline in overall job cuts. The 180,580 second-quarter job cuts across all industries was down 29 percent from the first quarter when job cuts totaled 255,878. Tech cuts during the second quarter represented 16 percent of all reductions.

The tech sector job market has become significantly more stable since 2001 and 2002, when job cuts averaged more than 100,000 each quarter. Evidence of the sector’s improving strength can be seen in Challenger’s daily tracking of hiring announcements.

Tech-sector hiring announcements increased 184 percent to 14,090 during the second quarter, from just 4,944 during the first three months of the year. Second-quarter hiring was led by computer firms announcing plans to add 11,770 workers.

Internet firms also are showing signs of growth. Google has announced plans to add 1,000 people in Michigan, a figure which will be included in the Q3 Challenger report. Ad sales across the Internet are reported to be booming, leading to a build-up of new ventures as net-savvy entrepreneurs try to cash in.

However, as more Internet businesses are established, the chances of getting laid off have increased. The number of job cuts by e-commerce firms increased tenfold from 139 during the first quarter to 1,394 during the second quarter.

The higher figure pales in comparison to the quarterly job cuts averaged by telecom and computer firms, but it is noteworthy because of the sudden surge.

While things appear to be going well in the tech-sector job market, there are some signs of trouble. Business spending on tech products has been solid, but with higher costs related to energy, raw materials and predictions of a second-half slowdown, it is likely that tech spending will not sustain its current pace.

A second quarter survey of chief information officers by industry trade publication CIO Magazine found that information technology spending will increase by only 6.9 percent during the next 12 months. That was down from the first quarter when CIOs said IT spending would grow by 8.6 percent.

Not only might hiring slow during the second half of the year, job cuts could increase because of a deluge of telecom mergers and acquisitions announced during the first half of the year. Once these deals are finalized, typically the first order of business is to shed redundant workers in an effort to offset the cost of the merger and return to profitability.

During the first half of the year, M&A activity was the leading reason for technology sector job loss. Corporate marriages resulted in 24,801 job cuts, 36 percent of all tech-sector cuts through June.

Innerwall joins Microsoft team

Innerwall Inc., a Colorado Springs-based provider of network access control and endpoint security solutions, is working with Microsoft to develop Network Access Protection solutions.

Network Access Protection provides a platform infrastructure that allows system administrators to monitor and control computer access to corporate networks as well as update non-compliant computers.

As more and more computers are connecting to the network from remote and often unprotected locations such as hotel rooms and coffee shops, it is necessary to ensure that only “healthy” computers are granted access to corporate networks.

“Controlled access coupled with monitoring, managing and re-mediating computers once on the network ensures end-to-end protection of corporate and customer information, online transactions and one’s identity,” said Tom Danner, Innerwall vice president of product strategy and management. “Working in tandem with Microsoft will give us a competitive advantage in delivering these solutions.”

Simtek announces higher than expected revenue

Simtek Corp., the inventor of monolithic nonvolatile static random access memory integrated circuits, has announced that revenue for the quarter ended June 30 is expected to be in excess of $6 million — which exceeds the high end of previous guidance.

Growth is coming from broad geographic and market segments. New orders for the quarter are expected to exceed the record level set during the first quarter of 2006, laying a foundation to support third quarter growth.

“Revenue for the first six months of 2006 will exceed total revenue for Simtek in the full year 2005,” said Brian Alleman, Simtek’s CFO. “New orders, which should be in the range of $15 million for the first half, support our growth projections. The company and its suppliers are really stepping up to support our growth.”

Amy Gillentine covers technology for the Colorado Springs Business Journal.