Category Archives: Layoffs

Questions Abound in Wake of Hurd’s Ouster

Not much happened this past week. Oh, except for the sudden resignation of Mark Hurd, HP’s now-former chairman and CEO, under mysterious circumstances and an obstinate cloud of suspicion.

I don’t think this story has played itself out. If the business press keeps digging, we’ll probably learn a lot more about the circumstances that precipitated Hurd’s abrupt ouster from the company he led for the last several years. The official story from HP,  as to what transpired and why Hurd had to go, doesn’t feel like the real story.

No Sexual Harassment

What we’ve been told is that an independent marketing contractor made sexual-harassment allegations against Hurd on or about June 29. HP’s board investigated the charges, and it found “numerous instances” in which Hurd submitted inaccurate expense reports intended to conceal Hurd’s “close, personal relationship” with the mystery woman, whom HP and her lawyer, Gloria Allred — yes, that Gloria Allred — refuse to identify.

At this point, I hasten to add that HP says it found no evidence of sexual harassment by the HP chieftain. What’s more, Allred wished “to make clear that there [had been] no affair and no intimate sexual relationship between our client and Mr. Hurd.”

What HP did find, according to the company’s general counsel, Michael Holston, was that Hurd’s behavior reflected a “profound lack of judgment” and violated HP’s standards of business conduct. Perhaps Holston is alluding exclusively to Hurd’s bogus personal expenditures on the company’s dime, which covered receipts for expenses ranging from $1,000 to $20,000 over two years, including meals and travel.

More Questions than Answers

As I mentioned before, though, it sure feels as though there’s a hidden dimension to this scandal. Questions abound.

Considering what HP has chosen to disclose about the matter, why didn’t it fire Hurd for cause instead of giving him a generous severance package? HP’s Omerta apparently is back with a vengeance. What about Allred’s client? Perhaps she’s walking away with a generous parting gift, too. Silence can be bought, though it doesn’t come cheap.

What was the nature of the relationship between Hurd and the mystery woman? It was’t sexual, evidently, but it was a “close, personal relationship.” Did it involve the disclosure of confidential, insider information by Hurd?

SEC Curiosity

This woman worked as a contractor on HP CEO forums that ran through the fall of 2009. If you will recall, the fall of 2009 was when HP acquired 3Com. Just before that acquisition was announced, some rather unusual trading in 3Com shares occurred, triggering the curiosity of the Securities and Exchange Commission (SEC). Did Hurd reveal anything to the mystery contractor that should not have been disclosed?

The SEC might wish to pursue that line of questioning.

There are other aspects to this story that I feel compelled to mention. Mark Hurd was lionized by shareholders and market analysts for increasing the market capitalization of HP during his reign. His actual accomplishments in that regard, however, might have been short-lived and overstated. That’s an argument that has been advanced repeatedly, including today, by Eric Jackson.

No Tears to Cry

While some shareholders might mourn Hurd’s passing, a large number of HP employees, past and present, won’t be shedding any tears for their former strongman. Hurd was reviled by many of them. It was’t for nothing that he had his own high-priced security detail and equipped HP’s executive entrance at its Palo Alto headquarters with the latest in physical-security gadgetry as well as a healthy dollop of old-school barbed wire.

Fear and loathing were palpable at Hurd’s HP. The CEO liked it that way. As recounted by the Los Angeles Times earlier today, Hurd made the following statement to the Wall Street Journal when he came aboard as HP’s CEO:

“As I’ve cut costs, I’ve seen some employees crying [when they've been laid off] and even brought to their knees. It’s painful — but as CEO these days, you face relentless pressure from shareholders.”

Should I say what I think here? In this case, I’ll keep my counsel. It’s better than having to hire one.

Fear of a Converged Data Center

In a relatively short piece today, Michael Vizard has managed to cover a lot of ground. He deserves plaudits for his concision.

Quoting Ashish Nadkarni, a practice lead for Glasshouse Technologies, Vizard’s salient point is that while vendors, notably Cisco and HP, are pushing data-center convergence with fiery ardor, enterprises have not responded with reciprocal fervor.

Resistance is Manifold

The resistance to data-center convergence is manifold. CFOs are wary of anything resembling forklift upgrades accompanied by substantial capital outlays. Meanwhile, CTOs and CIOs are leery of stumbling into vendors’ trapping pits, drawn by the promise of long-term cost savings into a dungeon of proprietary servitude.

Last, and definitely not least, there is cultural and political resistance to sweeping change within IT departments. This makes perfect sense. Any student of history will know that revolutions displace and supplant power structures. The status quo gets pushed aside.

If we think about data-center convergence, we find that many potential enterprise-IT interests are threatened by its advance. As Vizard has mentioned previously, IT departments long have had their specialists. They are staffed by high priests of servers, viscounts of storage, lords of networking, and a smattering of application wizards.

Kumbaya Falls on Deaf Ears

By its very nature, data-center convergence entails that all these domain masters work in concert rather than in isolation. That scenario has theoretical appeal, and many salutary benefits could result from such IT kumbaya and common cause.

However, human beings — particularly in a realm where their positions are subject to offshoring and where job security has faded into a bitter, mocking memory– can be forgiven for eschewing collective idealism in favor of realpolitik calculations of personal survival. In their minds, questions abound.

If the data center is converged, what happens to the specialists? Who benefits, who wins and loses, who emerges from the fray with a prosperous career path and who becomes a dead man walking? These are uncomfortable questions, I know. But you can be sure many people are asking them, if only to themselves.

Answers Needed

An integrated, unified data center, with across-the-board automation and single-console manageability, has its charms — some of which are undeniable — but not necessarily to the specialists who inhabit today’s enterprise data center.

Cloud computing, whether of the private or public variety, faces many of the same issues, though the public option addresses the CFO’s concern regarding capital expenditures. Then again, cloud computing is challenged by the same cultural and political issues discussed above, and by other inhibitors, such as nagging questions about security and compliance.

I know these issues have been discussed before, here and elsewhere, such as by Lori MacVittie at F5’s DevCentral. Vendors, especially executives ensconced in boardrooms eating catered lunches, tend to overlook these considerations. Their salespeople, though, need cogent answers — and they had better be the right ones.

Pondering HP’s $1-Billion Services Remake

I typically use this blog to convey my modest knowledge and understanding of industry developments and events, but toward the end of this post, I will ask my readers to provide me with some enlightenment. I hope you will be kind enough to assist in this ambitious endeavor.

First, let’s step back and consider HP’s major announcement yesterday. As Craig Matsumoto of Light Reading wrote, HP dominated, perhaps monopolized, the cloud-computing news yesterday with is plans to cut 9,000 employees and spend $1 billion over the next few years to extensively automate its customer-facing EDS data centers.

Yes, I know, HP says it will hire 6,000 employees back, but the upshot is that HP is radically revamping what’s left of EDS for a cloud-computing future in which customer relationships will involve intensive automation and a lot fewer humans than were necessary in the old “high touch” era of consulting’s halcyon days.

We’re in a different set of economic circumstances today, though, and no company embraces that lean, mean ethos like HP. It’s pushing standardized, commoditized hardware and relentless data-center automation with a near-medieval vengeance, employees and competitors be damned. If the shareholders are smiling, with their thumbs jutting upward, all is well in Mark Hurd’s austere universe.

All of which brings us to why this announcement was made. While Hurd is lauded by investors as the consummate operational scourge, buttressed by a zealous executive team that searches for efficiency gains and cost reductions like value shoppers looking for deals at Wal-Mart, he and his consiglieri were seen to be struggling to get full value from their $13.6-billion acquisition of EDS.  That’s not a favorable perception, and it’s not one Hurd or the HP board wants to see gain popular currency. Radical surgery was required, as it usually is (even perhaps when it isn’t) somewhere within HP.

Over at SearchDataCenter.comBarbara Darrow provides a cogent analysis of what’s behind HP’s data-center shakeup. She points out that HP, in its earnings call two weeks ago, reported that revenue from its services division grew a paltry two percent year over year, with much of that gain more than offset by currency fluctuations. Meanwhile, HP’s lower-margin PC sales spiked more than 20 percent during the same period.  The contrast between the performance of the two groups was stark and unwelcome.

So, more change comes to HP. The shuffling of bodies out of and back into the company will continue at a relatively frenetic pace until Hurd and his team crack the code or steer the company off the rails. If the history of the technology industry teaches us anything, it’s that past performance does not guarantee future results, so be careful about placing wagers on the ultimate outcome.

Speaking of results, this is where I need the benefit of your wisdom. During a call yesterday to announce its momentous overhaul to EDS, HP took a question from an analyst regarding the company decision to incur a GAAP charge rather than a non-GAAP charge (or charges) to account for the restructuring costs. Here’s the exchange, as excerpted from a Thomson Reuters transcript:

Toni Sacconaghi – Sanford C. Bernstein – Analyst

And then, Cathie, just on the charge. You know, this is a multi-year transformation, something clearly looking to improve your business. It looks like you will be excluding the restructuring charge from your non-GAAP earnings. Could you just review how you determine whether something is a charge or a one-time charge that you choose to exclude from non-GAAP earnings and what is a normal course of transformation in terms of charge and what you would include in as a charge and non-GAAP earnings?

Cathie Lesjak – Hewlett-Packard Company – EVP, CFO

Sure. We look at a number of different factors when we’re determining whether or not the charge should be a GAAP-only restructuring charge. We look at things like whether or not it’s one-time in nature as opposed to a recurring –. It’s generally a global in scope kind of initiative involving a number of different countries.

It also has to involve something structural, long-term strategic realignment of a business segment or across a business segment. While business charges in non-GAAP are typically more routine, routine rebalancing of activities and adjustments to changing business conditions. So this is really a structural change.

We are transforming the Enterprise Services business with the investment that we are making and we are making these one-time investments to modernize our delivery organization and expand our global footprint and fundamentally simplify our operating model and it is really those pieces that have us take this out as a GAAP only charge. We don’t really want it to basically taint the ongoing earnings with something that is nonrecurring in nature.

Ann Livermore – Hewlett-Packard Company – EVP, Enterprise Business

Tony, this is Ann. One example of that would be a when Cathie mentioned simplifying the operating model, one action we’re doing is to take some layers out of the structure. If you look at — we always count layers in between our clients and our CEO as one of the things that we think is important from an operating model perspective. So part of this action, for example, and why we think the charge is appropriate this way is because we’re taking some layers out of the structure.

Huh? Alas, I am a simple man, but that distinction seems arbitrary to me, open to misinterpretation, if not abuse. Please enlighten me, dear readers, as to why HP applied the relevant charges in this manner. This curious mind wants to know.

HP’s a Chinese Company?

As HP continues its post-acquisition assimilation and integration of 3Com, the latter’s China-based H3C, which bloomed from 3Com’s former joint venture with Huawei, has remained practically untouched.

While managers and employees at HP ProCurve and at 3Com’s U.S. offices anxiously speculated on how the integration would affect them, H3C’s leaders and followers weren’t nearly as troubled.  In China, Hong Kong, and Macau, H3C will continue to exist as, well, H3C for an unspecified period. It’s uppermost executive leadership, headlined by Shusheng Zheng, remains intact and wields considerable clout.

There are at least a few reasons why H3C has emerged unscathed. Consider that it runs a vital piece of the low-cost, networking R&D that HP plans to leverage in its ambitious plan to pulverize the margins of Cisco Systems. Consider, too, that H3C retains, as HP will happily tell you, a significant installed base of customers and market share in China. Finally, give some thought to H3C’s interesting status as a Chinese company, which might be the most important consideration of all.

Many of you will know that I’ve been sounding an alarm for a while about China’s nationalist mercantilism and its policies and regulations pursuant to “indigenous innovation.” With its government-controlled capitalism, China has come to a couple big realizations: it wants to evolve far beyond its initial role as low-cost electronics manufacturer to the world, and it wants to establish world-leading companies in key technology-intensive industries. It wants to do much else besides, but those two goals are near the top of the priority list.

Concomitant with those goals is China’s growing realization that demand from its own market is increasingly important relative to market demand from the U.S. and Europe. The financial crisis that afflicted the U.S. and Europe has hastened that transition, but the shift probably was inevitable. The old paradigm, in which America borrowed money and China made goods that Americans then purchased, had become untenable. American consumers don’t have the disposable income to keep that shell game going indefinitely.

So, as American and European markets and corporations become “less indispensable,” in the words of author Ian Bremmer, China recognizes that its plans for world domination in target industries rest on how well its companies do at home rather than how well they do abroad. The Chinese market has become the central battleground.

HP knows it, too. It bought 3Com, through its ownership of H3C, as a Chinese company with an American facade. HP wants H3C to remain a Chinese company, because benefits accrue from that status. Chinese companies receive special dispensation and preferential treatment from China’s government.

Such is definitely the case for encryption-related information-security products, including firewalls, antispam appliances, and backup and recovery systems. For those products, China requires technology vendors to provide encryption keys to be certified for government procurement projects. Liu Jingwei, associate research manager for China at Springboard Research, explained Chinas’s reasoning to ZDNet Asia:

“First, as a major economic power, China has increasingly realized that it has to keep tight control of national information security, rather than rely on ‘uncertified’ foreign products which may impose security loopholes.”

A second and perhaps more important reason, he added, is that the country has “introduced a series of measures in government procurement to promote locally-developed innovations” since the global economic crisis. The new regulations are consistent with the government’s previous actions to foster local innovation, said Liu.

Meanwhile, Chinese companies are exempt from the requirement. Fortunately for HP, at least for as long as it leaves H3C untouched, it qualifies as a Chinese company. In the same ZDNet Asia article from which the above quote was excerpted, we find this aside:

Citing the official Web site of the China Information Security Certification Center, Liu added that 67 security products from 22 companies have since been certified between August 2009 and April 2010. All these companies, he noted, are local vendors with the exception of H3C. H3C is considered a local vendor with historic ties to Huawei and the Chinese government, but is in reality a wholly-owned subsidiary of Hewlett-Packard following HP’s acquisition of 3Com.

Historic ties to the Chinese government? How will HP maintain them? Is that even possible, and at what price? It will be interesting to see how this story plays out. The implications will be far-reaching for HP and its competitors.

Rumors of 3Com/HP Layoffs in Marlborough

I’m hearing rumors of layoffs at 3Com and HP facilities in Marlborough, Mass.

The news wouldn’t come as a shock. Many at 3Com’s erstwhile headquarters had prepared for the worst, recognizing that lean HP would seek to shed duplicative positions in corporate administration and operations. Also, it wouldn’t be a surprise to see HP consolidate facilities in the area.

H3C to Continue After HP’s 3Com Integration

Now that 3Com’ has been fully and legally acquired by HP, the latter is working urgently to integrate the former and to streamline operations and field-sales efforts.

According to sources familiar with the situation, 3Com’s U.S. operations will be integrated into HP by the end of this month. The remainder of 3Com’s worldwide operations are expected to be subsumed within HP by early June, though labor laws and regulations could slow the process in some countries.

For an unspecified period, 3Com’s H3C unit will retain its name and corporate identify in China, Hong Kong, and Macau. Some rumors suggest H3C will continue to operate as a standalone entity for two years.

Shusheng Zheng, an executive VP at 3Com and CEO and COO of H3C, apparently will lead sales efforts in H3C’s territories, and he will also retain responsibility for a significant portion of H3C’s research and development in China.

Last week, an all-hands integration meeting was hosted at 3Com’s worldwide headquarters in Marlborough, Mass., by Ron Sege, 3Com’s chief operating officer, and Marius Haas, HP Networking’s senior vice president and general manager.

While 3Com’s engineering staff in China are likely to see little change in their roles and responsibilities, 3Com’s executive team in Marlborough anticipates a different fate. Some personnel at 3Com’s headquarters might receive favorable transition offers, but many others will not be required after the handover is complete. Some 3Com executives had the foresight to design rich acquisition-triggered severance provisions (also known as “golden parachutes”) into their employment contracts with 3Com. As such, they stand to do rather well even if HP cannot find a place for them.

At the all-hands-meeting, Haas apparently conceded that HP must develop a stronger enterprise-networking sales team to compete effectively against Cisco Systems. HP is said to espouse an ambitious five-year plan to topple Cisco as the market-share leader in enterprise networking. Insiders say HP believes the seemingly grandiose goal is realistic.

Might Huawei Consider Extreme Acquisition?

It’s Friday, and I’m in an expansive mood. Speculation is in the air.

Extreme Networks is going through some difficult times, with executive overhauls, layoffs (reportedly still continuing), and stiff competition that figures to intensify now that HP is bringing 3Com under its corporate roof.

Fortunately for Extreme and its shareholders, the company’s acting CEO, Bob Corey, has an interesting track record. When he’s at a company, it tends to be acquired. Here’s some of Mr. Corey’s history, as recounted late last fall by Eric Savitz at Tech Trader Daily:

*Corey was CFO at Thor Technologies when it was acquired by Oracle in 2005.

*Corey was chairman of Interwoven when it was acquired by Autonomy in March 2009

*Corey was CFO at Forte Software at the time it was acquired by Sun Microsystems in October 1999.

*Corey was CFO of Documentum, until about a year before it was acquired by EMC.

Moreover, according to a Schedule 13D SEC filing last month, the Cowen Group’s Ramius LLC and its subsidiaries obtained significant stakes in Extreme. Not much has been written or said about this transaction, but it warrants attention.

Finally, we know Huawei would like to make acquisitions in the U.S. Recently, Huawei is said to have expressed interest in acquiring Motorola’s network-infrastructure unit. In connection with that bid, and perhaps others, Huawei reportedly has broached a “mitigation agreement” with the U.S. government, similar to the pact Alcatel signed when it acquired Lucent. The objective of the agreement would be to allay American concerns relating to national security.

In the past, Huawei’s acquisitive ambitions in the U.S. have been thwarted on national-security grounds. The Chinese networking company, alleged to have close ties with China’s defense and intelligence agencies, saw its bid for minority ownership of 3Com frustrated a few years ago when Bain Capital was discouraged from pursuing the deal by the U.S. government.

If Huawei can satisfactorily address the national-security concerns of the Obama Administration, it would be able to pursue not only an acquisition of Motorola’s network-infrastructure unit, but of other U.S.-based networking vendors, too.

Extreme might be a logical candidate. The company is available, it has a product portfolio of interest to Huawei (which wants to strengthen its enterprise offerings to counter HP/3Com and Cisco in China and elsewhere), and it has intellectual property (patents) that Huawei might find attractive.

Sure, Extreme has lost a lot of engineering talent in Silicon Valley during its recent struggles. But Huawei doesn’t need engineers. It has plenty of those in China.

While this post is entirely speculative, I would not be surprised to see Huawei make an enterprise acquisition. Extreme wouldn’t be the only option available to Huawei, but it would probably be the easiest to execute in terms of regulatory constraints and integration challenges.

HP Challenges Hallowed Tech-Industry Axiom

Only those employed or formerly employed at HP can tell us what it’s really like inside the compound, but a feature article posted on the Forbes website prompts some obvious questions about what’s happening behind the security checkpoints.

Then, of course, there are all the rumors about monthly layoffs. But let’s deal with the Forbes story, because it includes some fascinating details.

Mostly, when I see these CEO profiles in the business press, I prepare myself for the worst. I expect unquestioning hagiography, and, too often, that’s exactly what I get. There’s some of that in the Forbes story on HP CEO Mark Hurd, but there’s much else besides.

We learn that Hurd is driven, never satisfied, always pushing himself and his people for better results. He’s eliminated waste from HP, but he’s also relentlessly chopped at departments and their personnel. Is he still cutting fat or is he now slicing into muscle, sinew, and bone? It’s hard to say.

One thing seems certain: The natives within HP are restless. Quoting from the article:

Below the senior tier, however, HP is more miserable than restless. It consistently ranks at the bottom of its big-scale competitors on Internet sites where employees compare notes. On one ( it scores 1.6 out of a possible 5 stars, compared with 3.3 at Cisco and 3.7 for IBM. At HP managed a 2.5 out of 5 among 1,045 employees (“If you want to be kicked like a dog, come work here!” is typical), three slots above Countrywide Financial, and Hurd got a 30% approval rating (IBM’s Samuel Palmisano, 40%; Chambers, 60%). Common complaints concern overwork, favoritism and managers looking over their shoulders in fear of not meeting Hurd’s inexorable goals. “A sweatshop,” says one low-level manager who recently departed. “No one wants to quit now, but watch them go when the economy recovers.”

The pain seems particularly acute for some of the dwindling population of long-term vets who remember HP, perhaps wrongly, as a warm and caring place. Founders William Hewlett and David Packard devised the cuddly idea of management by walking around and hosted company cookouts to buffer their hard-nosed, hard-driving approach. By contrast, HP’s executives staff arrives at headquarters in Palo Alto through a secure entrance, surrounded by barbed wire.

Wait a second. Did you catch it? “HP’s executive staff arrives at headquarters in Palo Alto through a secure entrance, surrounded by barbed wire.” Hmm. Is it Palo Alto’s version of the Green Zone? Does Hurd address the HP masses from a raised lectern on a stage protected by chicken wire?

Can a corporate culture be said to be healthy when the company’s uppermost executives are protected as though they’re in a war zone, presumably under real or imagined siege from their own employees? The mind (mine, anyway) boggles.

But here’s the truly disturbing thought, a question I tried not to ask myself: Can HP continue to churn out profits and growth even as it alienates and physically distances its own employees?

The old truism in the technology trade is that employees are a company’s greatest asset. Pursuant to the philosophy of enlightened self-interest, technology companies realized they were in an industry where success largely was predicated on innovation, knowledge, and intellectual property. As a result, people — employees who provided all that value creation — were indispensable.

But is it still true? While not alone, HP has been at the forefront of a technology-industry sea change. In recent years, but preceding the ascension of Hurd, HP has moved from a business model that relied on qualitative differentiation based on research and development to one more dependent on quantitative differentiation based on relentless commoditization of technology markets.

It’s pending acquisition of 3Com is a case in point. That deal was driven by HP’s desire to use 3Com’s standards-based, relatively low-priced networking gear as a commoditizing cudgel to put price and margin pressure on Cisco. The vast majority of 3Com’s engineering talent is in China, where engineers are not nearly as expensive as they are in Silicon Valley. Hence, HP’s cost of networking goods decreases, giving it the latitude to undercut Cisco on price.

As Ernest Park, CIO at 3M, says in Forbes piece:

“IBM doesn’t like to move on price, and Mark is very aggressive. He’s a great salesman, and he wants to get share.”

IBM doesn’t like to move on price, and, believe me, neither does Cisco. Margin is very important to Cisco, and to its shareholders. Part of Hurd’s strategy is to make Cisco bend or break on the margin issue, which is why Cisco is scrambling so hard and fast to define a network-centric vision for cloud computing and to move aggressively into those vaunted market adjacencies.

If HP wins, though, we might have to question that axiom about employees being a company’s greatest asset. According to a growing number of accounts, HP increasingly views its employees as cost factors as opposed to value generators.

HP Engineering Exodus?

LIke many people, I hear rumors occasionally. The challenge is in determining whether the source and substance of the rumor can be trusted.

If you’re dealing with a familiar source, you’re in a relatively good position to assess the veracity of what you’re being told. When that’s not the case, you’re in uncharted waters, left to navigate without a GPS or a compass — and sometimes without even a paddle. It’s in those cases that you invoke deduction and intuition.

There’s a rumor I’ve been hearing lately about engineering defections at HP’s American operations. I don’t have granularity on the numbers involved, where or in what departments the exodus is occurring, or how widespread the flight might be.

At first, I dismissed the rumor. Given the state of the economy, I wondered, where would these migrating engineers go? Still, at the top of the food chain, somebody always needs a good engineer. The best would find new employers.

But why would it be happening?

Well, under the rule of Carly Fiorina and now Mark Hurd, HP has become less the redoubt of the engineer. Under Fiorina, marketers were ascendant, and under Hurd we’ve witnessed the rise of beancounters and operational technocrats. It’s not the company of the eponymous founders, and the HP Way is as likely to be a street address as a company ethos.

Then, if you’ll remember, there was the recent survey, listing the best and worse of technology-industry employers. HP ranked as one of the lowest-rated technology companies for which to work, and Mark Hurd was not viewed favorably by HP employees.

In 2008, Hurd gave a talk bemoaning the deteriorating pool of technical talent in the USA. Said Hurd:

“In this country, we have a problem. The source of this country’s greatness has been its technical talent . . . But you have to go where the tech talent is, and right now the tech talent is in Asia.”

“We often can’t keep [engineers] in the country even after they’ve graduated from U.S. universities like Stanford.”

Hurd said that only 40 percent of HP’s then-40,000 engineers were based in the US. Previously (he did not specify an earlier date), HP employed about two thirds of its engineering staff domestically, according to the HP CEO.

The evidence suggests that HP was having an engineering problem in its home market. In his 2008 talk, Hurd rationalized HP’s engineering offshoring. It isn’t a stretch to suppose that HP’s American engineers might wish to seek employment at a company more committed to their job security.

Finally, HP recently announced the acquisition of 3Com, formerly an icon of American computer networking that has remade itself into a Chinese company with an American history. Most of 3Com’s engineering is done in China. When the deal was announced, I wondered whether HPs ProCure engineers might be the ultimate losers.

I don’t have hard data to confirm the rumor about engineers leaving HP. If the rumor were to be confirmed, though, it wouldn’t come as a shock.

Valley’s Commercial-Property “Bloodbath” Symptom of More Serious Malady

The sorry state of Silicon Valley’s commercial real estate is a symptom of a more serious malady.

Quoting commercial-property numbers from CB Richard Ellis Group Inc., Bloomberg reports that more than 43 million square feet (4 million square meters) of office space — the equivalent of 15 Empire State Buildings — stood vacant in Silicon Valley at the end of the third quarter, the most in almost five years. It is the biggest office-property glut to afflict the peninsula since the dot-com bust.

Bloomberg reports that about 21 percent of Silicon Valley’s Class A office space is vacant, as is 20 percent of low-rise “flex” (research and development) space, which can be used for offices or manufacturing, according to CB Richard Ellis.

Given the Valley’s persistently high unemployment rate — holding at about 12 percent — and the generally weak state of the broader economy, the situation is not expected to improve any time soon. With layoffs mounting at some of the Valley’s largest employers, a steady flow of jobs being transferred overseas, and a paucity of venture-backed startup companies to pick up the slack, the market dynamics don’t favor those who own and manage the area’s office buildings.

Foreclosures of commercial property are expected to double in 2010, and job growth isn’t anticipated to increase until 2012, according to some projections. Meanwhile, Valley companies that remain in business are unwilling to pay sticker-price rents, using the abundant supply of space as negotiating leverage for sharp discounts.

I suppose it’s good news for those seeking space. On the whole, though, the data suggests the Valley is in frail health. Unemployment is way up, commercial-property values are about to go way down, the traditional IT industry has tottered into slow-growth maturity and seemingly endless cost-cutting, the VC community has been decimated, and the social-networking upstarts depend (to a certain extent) on robust consumer spending that is unlikely to materialize in the near term.

The hope is that new industries can supersede information technology as the Valley’s growth engine. That could happen. Cleantech startups are drawing an increasing percentage of overall investment dollars, and the long-term prospects for that sector are bolstered by geopolitical as well as economic imperatives.

But it will take time. As the title of this blog proclaims (and has done for some time), we are witnessing twilight in the valley of the nerds.

Nokia Siemens Networks to Focus on Market-Share Gains and Reduced Costs

Even though it struck out twice in auction-ring swings for pieces of insolvent Nortel Networks, joint-venture Nokia Siemens Networks (NSN) apparently has devised another plan to improve its fortunes as a vendor of telecommunications-networking gear.

For the past two years, NSN has focused primarily on profitability at the expense of market share. Now, under new CEO Rajeev Suri, the company will switch gears, prioritizing market share ahead of all else. Reuters reports that Suri told Finnish daily Helsingin Sanomat the following:

“In early 2008 we made a strategic decision to focus more on cash flow and profitability than on the market share. Now it’s time to give it up and to focus on the market share.”

What NSN was doing wasn’t working, so a change of strategy doesn’t seem misplaced. Losing competitive ground to Huawei, ZTE, and Ericsson in the wireless-equipment market, NSN had reached a point where different, if not entirely desperate, measures were required.

To gain market share, however, NSN will have to become a different company. Its CEO concedes that the joint venture must position itself as a “cost leader” if it is achieve market-share gains without losing money. The company also agrees that it must become more aggressive with its pricing strategies and marketing.

As with its computer-networking brethren, such as Cisco and HP (now including 3Com), NSN will be turning to lower-cost geographic jurisdictions whenever possible to reduce its operating costs connected to the design, development, and manufacture of its products. One example is the company’s recent decision to produce 3G equipment at its Oragadam facility near Chennai, India, by May 2010.

NSN also apparently is following the Cisco model of seeking “market adjacencies,” though I’m not sure the German-Finnish joint venture would use the same terminology. NSN said Monday that its telecommunications expertise gives it a mandate to offers solutions to partners and customers involved with renewable energy, intelligent power grids, and smart metering.

Said Juhani Hintikka, head of operations and business software at NSN:

“When you look at what is required to manage power grids, or to make full use of unpredictable renewable energy sources such as solar and wind, as well as bring greater transparency to and flexibility to billing, the synergies with the core of our existing telecoms business are obvious.”

As of January 2010, NSN will be restructured from five business units into three: Business Solutions, Network Systems, and Global Services. Efforts related to renewable energy and energy efficiency will be folded into Business Solutions.

The company, in the midst of shedding as many as 5,800 jobs by 2011 — presumably to become leaner and meaner in its quest for increased market share — says its primary business focus remains the telecommunications industry. Like Cisco and others, however, it is looking to enter related growth markets with its products, services, and technologies.

Elucidating Technology Layoffs

At GigaOm, Kevin Kelleher recently wrote a blog post that attempted to answer the following question: “Why are tech layoffs rising in a recovery?

Although I think the question is skewed — you call this a recovery? — what follows are my replies, enumerated for the convenience of the reader.

1) The alleged recovery isn’t really a recovery in the traditional sense. Without jobs or income security — and mired in crushing personal debt — many American consumers can’t and won’t spend at their formerly shop-till-you-drop pace. The American consumer accounts for as much as 70 percent of national GDP (though some economists energetically debate the exact percentage).

2) What happens in the stock market has a tenuous connection to what happens in the real world. Stocks rise and fall, based on perceived valuations, but don’t make the mistake of thinking those fluctuations are always related to what’s happening in the underlying economy.

3) Much of information technology is being commodified. Yes, there are areas that still require advanced R&D conducted by brainy PhDs, but they’re not as prevalent as they were.

4) IT is a mature industry. It’s been around nearly 40 years. Like other industries that preceded it, IT will exhibit the telltale signs of maturity: slow growth, consolidation, commodification, an increased focus on reduced operating expenditures, etc.

5) Whenever possible, IT companies are shifting jobs to low-cost geographies, such as China, India, Eastern Europe, Latin America, and even the Philippines. This phenomenon is tied to points 3 and 4.

There doubtless are others reasons, too, but those are the main ones.