Net Layoffs Hit a Dubious Milestone

Baldwin Louie — Tue, 08 May 2001 18:00:00 -0400

Coming on the heels of a gloomy stretch of employment statistics, TheStandard.com's Layoff Tracker now shows that Internet-related firms have announced more than 100,000 job cuts since December 1999.

While not exactly cause for celebration, the milestone offers a chance to look back at how this figure got so big so fast.

3Com pushed the tracker over the 100,000 mark with Monday's announcement that 3,000 of its employees will be cut because of "turmoil in the telecommunications industry." The network equipment maker is only one of 727 firms that have cut their staffs to date. The layoffs have occurred across the Net sector, with tech companies and online consulting firms being the hardest hit.

The Layoff Tracker reached the 50,000 halfway mark on Feb. 2. Some of the larger announcements of job cuts that helped it inch over the 50-yard line came from Lernout & Hauspie, Nortel Networks, iXL and MarchFirst.

The Layoff Tracker includes confirmed reports of staff reductions affecting 10 or more workers at Internet-related companies or from the Internet divisions of offline firms.

TheStandard.com's figures are somewhat conservative compared with those reported by other researchers. The totals do not include staff cuts made at all technology and telecom firms. For example, Dell Computer's announcement on Monday of 3,000 to 4,000 job cuts is not included in the tracker's total. Other researchers, such as Challenger, Gray and Christmas, count Net layoffs in the 572,000 range.

Large-scale layoffs that occur as a result of a company closure are included. To date, TheStandard.com's Flop Tracker has tallied 181 Net firms that have closed up shop. Interestingly, half of all companies reporting three or more rounds of layoffs have ended up shutting down.

The 100,000 layoff milestone is only the most recent in a string of reports that point to a worsening national employment picture. On Tuesday, the Labor Department reported a 0.1 percent drop in productivity for nonfarm business – the first drop in six years.

Last Friday, the U.S. Department of Labor announced that nationwide unemployment has hit 4.5 percent, the highest jobless rate since 1998. On Thursday, a report showed that unemployment insurance claims have topped 870,000 since October 2000.

Just a couple days prior, the Economic Cycle Research Institute released a report depicting an equally gloomy future. The ECRI's Leading Employment Index, which predicts the health of the nation's job market 12 months out, has registered declines across several economic sectors for the past three months.

History has shown that when the index drops across several sectors, a recession might be near.

In fact, the National Association of Purchasing Manufacturers also reported a dip in its services sector employment index. Some 80 percent of all U.S. jobs are in service industries. The NAPM's data show that within a wide range of companies in the services sector, a higher percentage are reporting that employment is staying the same or shrinking. By extension, fewer companies are reporting an increase in employment.

Economists agree that decreased consumer spending will be the straw that breaks the U.S. economy's back. Because consumer confidence and purchase patterns are heavily influenced by the job market, further deterioration of employment figures might seal the deal on a U.S. recession.

THREE'S A CHARM? 50 percent of the Net firms that announced three or more rounds of layoffs are now out of business.
OUT OF BUSINESS
Who	# of Rounds of Layoffs	Total	Status
AllAdvantage	5	570	Closed on January 31, 2001 due to current market conditions.
CarOrder.com	3	226	Closed on August 18, 2000 to relaunch, and never got off the ground.
Convergent Communications	3	800	Company filed for Chapter 11 bankruptcy protection on April 19, 2001.
eToys	3	1067	eToys.com closed their website and filed for bankruptcy protection on March 7, 2001. KB Toys recently won a bid for all of eToys.com's assets.
Furniture.com	3	156	Unable to secure additional funding, they closed on November 6, 2000.
iMotors.com	3	800	Unable to secure additional funding, they closed on April 25, 2001.
ISP Channel	3	109	Closed on December 11, 2000.
Kozmo.com	6	1619	Closed on April 11, 2001 due to current market conditions.
MarchFirst	4	3510	Company sold its operating assets to Divine InterVentures for $70 million.
PlanetRX.com	3	120	Closed on February 12, 2001.
Quepasa.com	3	58	Liquidated its assets on December 27, 2001.
Quokka	3	527	Due to current market conditions, the company closed on April 18, 2001.
Xpedior	3	950	On April 20, 2001 the Company announced a voluntary filing for Chapter 11 bankruptcy. They have been delisted by NASDAQ and are currently traded on OTC:BB.
STILL AROUND
Who	# of Rounds of Layoffs	Total	Status
24/7 Media	3	400	The company recently sold Sabela, it's Australia media division, to DoubleClick.
3Com	3	4045	Announced layoffs of 3,000 on May 7, 2001.
Alta Vista	3	475	Company announced launch of Alta Vista New Zealand.
Buy.com	3	190	Announced earnings on May 2, 2001. Company says the restructuring reduced their cash burn rate.
Creative Planet	3	110	Company recently announced a new Chief Financial Officer.
Drkoop.com	3	152	Company is now traded on the OTC:BB and has announced that it will not pursue a reverse stock split.
Excite@Home	3	645	Company announced their layoffs on April 30, 2001.
NBCi	3	320	On April 9, 2001, NBC announced that they would acquire all the assets of NBCi and integrate them back into the company.
Network Commerce	4	398	Company announced their earnings on May, 2001. Have cut their staff by two-thirds and are exploring strategic alternatives possibly a merger, an asset sale, additional equity or debt investment.
Oxygen Media	3	112	Company recently partnered with AOL Time Warner.
Priceline.com	3	168	On May 7, 2001 Company announced a new CEO, Richard Braddock, and a new President, Jeffrey Boyd.
Razorfish	3	520	Company announced on May 7, 2001 that their two co-founders, Jeff Dachis and Craig Kanarick, stepped down. A new CEO was announced the same day.

Katie Motta contributed to this report.

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Net Layoffs Hit a Dubious Milestone