Executives across Silicon Valley are finally admitting that they are not insulated from the turmoil in the world's financial markets – after months of refusing to believe that an economic downturn would affect the hi-tech industry.
Online auction giant eBay looks set to be the latest west coast company to slash jobs, with reports suggesting that it could begin announcing as many as 1,500 cuts – 10% of the company's workforce – as early as today.
Such an announcement would be another sharp reminder to Silicon Valley's most powerful, many of whom have continued to insist that the technology sector would remain unaffected by the credit crunch – despite evidence that it was already hitting them hard.
Two weeks ago Google chief executive Eric Schmidt waved off suggestions that his company could be in for tough times if a deep recession took told – particularly since Google is increasingly reliant on the advertising industry.
"My guess is the drama is in New York, not here," he told reporters at the company's headquarters in Mountain View, California. "It's business as usual at Google."
Since Schmidt's statement, Google shares have dropped a further 28 points, ending up at 386 by the close of play on Friday. Last December stock was trading at an all-time high of 714.
Even more bullish was Microsoft boss Steve Ballmer. As recently as September 26, he deflected concerns that the crisis would shake through to his company, claiming there was still "buoyancy" in the technology sector.
"Our industry is not immune to what goes on in the global economy," he said. "And yet as I travel… given the current circumstances, people still see a certain buoyancy in the market."
That message turned around sharply in just a few hours, however, when Ballmer was forced to concede. "We have a lot of business with the corporate sector as well as with the consumer sector, and whatever happens economically will certainly affect itself on Microsoft," he said at a meeting in Norway on Friday.
Microsoft shares were trading at 26 points at the end of last week, having lost a third of their value in the past year.
The situation is similar for the technology industry's other giants, leaving the market confused by mixed messages. Stock market flotations have dried up for hi-tech companies over the past year, and even the venture capitalists who fund early stage businesses are cutting back drastically. Investors are so jittery, in fact, that the tiniest of rumours can have a huge impact.
On Friday a single report – put out by a blogger on an unfiltered part of CNN's website – claimed that Apple chief executive Steve Jobs had suffered a heart attack. Before the company even had time to deny the rumour, Apple shares had started dropping sharply, losing 8% of their value in just a few minutes. Although the prices quickly corrected once it became clear that there was no truth in the report, it became clear how quickly panic could take over.
Another company facing an uncertain future is Yahoo, which has struggled for several years to reassure investors over its future – despite being one of the world's biggest web companies. Just months after spurning a $44bn takeover bid from Microsoft, chief executive Jerry Yang last week sent a memo to all staff which indicated he could be preparing for mass layoffs.
Yang's message said that Yahoo needed to "get fit as an organisation" and said that he had hired management consultants Bain & Co. Job cuts look certain as a result, following hard on the heels by the enormous 25,000 cuts announced by computer Hewlett Packard last month.
Some parts of the hi-tech economy are better suited to the tough economic climate, however.
The videogames industry, for example, often benefits when people decide to cut down their entertainment budgets in favour of staying home. Last week British retailer Game announced improved pre-tax profits of £33.4m for the first half of the year and predicted a 12% increase in sales for 2008.
But some leading experts retain their view that the wider internet industry will be able to weather the storm, even if it may prove tough going.
"The advertising market as a whole will slow down, but I think search advertising will be less affected," said Danny Sullivan, the editor of news website SearchEngineLand.com. "I think someone like Google has more than enough to make it through."
Online auction giant eBay looks set to be the latest west coast company to slash jobs, with reports suggesting that it could begin announcing as many as 1,500 cuts – 10% of the company's workforce – as early as today.
Such an announcement would be another sharp reminder to Silicon Valley's most powerful, many of whom have continued to insist that the technology sector would remain unaffected by the credit crunch – despite evidence that it was already hitting them hard.
Two weeks ago Google chief executive Eric Schmidt waved off suggestions that his company could be in for tough times if a deep recession took told – particularly since Google is increasingly reliant on the advertising industry.
"My guess is the drama is in New York, not here," he told reporters at the company's headquarters in Mountain View, California. "It's business as usual at Google."
Since Schmidt's statement, Google shares have dropped a further 28 points, ending up at 386 by the close of play on Friday. Last December stock was trading at an all-time high of 714.
Even more bullish was Microsoft boss Steve Ballmer. As recently as September 26, he deflected concerns that the crisis would shake through to his company, claiming there was still "buoyancy" in the technology sector.
"Our industry is not immune to what goes on in the global economy," he said. "And yet as I travel… given the current circumstances, people still see a certain buoyancy in the market."
That message turned around sharply in just a few hours, however, when Ballmer was forced to concede. "We have a lot of business with the corporate sector as well as with the consumer sector, and whatever happens economically will certainly affect itself on Microsoft," he said at a meeting in Norway on Friday.
Microsoft shares were trading at 26 points at the end of last week, having lost a third of their value in the past year.
The situation is similar for the technology industry's other giants, leaving the market confused by mixed messages. Stock market flotations have dried up for hi-tech companies over the past year, and even the venture capitalists who fund early stage businesses are cutting back drastically. Investors are so jittery, in fact, that the tiniest of rumours can have a huge impact.
On Friday a single report – put out by a blogger on an unfiltered part of CNN's website – claimed that Apple chief executive Steve Jobs had suffered a heart attack. Before the company even had time to deny the rumour, Apple shares had started dropping sharply, losing 8% of their value in just a few minutes. Although the prices quickly corrected once it became clear that there was no truth in the report, it became clear how quickly panic could take over.
Another company facing an uncertain future is Yahoo, which has struggled for several years to reassure investors over its future – despite being one of the world's biggest web companies. Just months after spurning a $44bn takeover bid from Microsoft, chief executive Jerry Yang last week sent a memo to all staff which indicated he could be preparing for mass layoffs.
Yang's message said that Yahoo needed to "get fit as an organisation" and said that he had hired management consultants Bain & Co. Job cuts look certain as a result, following hard on the heels by the enormous 25,000 cuts announced by computer Hewlett Packard last month.
Some parts of the hi-tech economy are better suited to the tough economic climate, however.
The videogames industry, for example, often benefits when people decide to cut down their entertainment budgets in favour of staying home. Last week British retailer Game announced improved pre-tax profits of £33.4m for the first half of the year and predicted a 12% increase in sales for 2008.
But some leading experts retain their view that the wider internet industry will be able to weather the storm, even if it may prove tough going.
"The advertising market as a whole will slow down, but I think search advertising will be less affected," said Danny Sullivan, the editor of news website SearchEngineLand.com. "I think someone like Google has more than enough to make it through."
