Bad Day For Technology, Bad Day For The Dow
I’m thinking very few people saw this day coming, but maybe they should have. Microsoft, the one company that’s always weathered the storm of bad economic news, laid off 5,000 people today on news of slow sales of their operating system and other software. Immediately afterwards, Intel announced they were laying off 6,000 people because of slow PC sales. Many other companies also announced layoffs today, with the total ending up somewhere around 20,000 jobs being eliminated for the day; ouch! There’s a major hit to an already weak world economy, since all of these jobs aren’t in the United States.
It turns out the Forbes.com runs a daily ticker of how many layoffs there have been since November 1st of 2008, and not including today, that figure had jumped to 527,000+. No sir, losing that many jobs in such a short time span is not a good thing at all. Unemployment figures have gone up again, but, truthfully, we all know that unemployment is higher than what the numbers are indicating. Official numbers are only given for the number of people who are collecting unemployment, and since the government only gives you six months (or maybe now they’re giving the extended unemployment, like they did during the time of the first President Bush), it means some people will fall off without finding new employment. Happens all the time.
The overall market, for what it’s worth, only fell about 105 points today, being somewhat buoyed by the one breath of fresh air on the day. That was Google’s announcement that their quarterly earnings beat Wall Street forecasts because of strong advertising sales. Their profit was down from last year, due to some corrections that had to be made due to investments in Clearwire Corp and Time Warner Inc unit AOL. However, their profit was $5.10 a share, as opposed to the predicted $4.95 a share by Wall Street. And, based on that good news, their stock went up 2.6% today; whew!
Now, I feel the need to mention something that many people don’t know. Many of the companies that lay people off actually make a profit. Indeed, it was even indicated in a paragraph that was part of a letter sent out by Steve Ballmer of Microsoft:
“Today we announced second quarter revenue of $16.6 billion. This number is an increase of just 2 percent compared with the second quarter of last year and it is approximately $900 million below our earlier expectations.”
An increase of just 2%; how much money does Microsoft make? There are many hospitals across the nation that would jump up for joy on making a profit of 2%. But it’s not about making minor profits; it’s about making big profits for the stock holders, as well as the companies. Because spending is projected based on trying to anticipate what’s coming next, and in some companies that means research, companies budget just how much profit they’re expecting to make, and pretty much start spending that money early. Thus, when the profits aren’t as high as expected, they suddenly have to cut back because they know they’re not going to be bringing in the type of money to cover all that spending. It kind of reminds us of how the government works; scary, isn’t it?
President Obama has inherited a real mess. Once again, is $700 million dollars of a bailout going to be enough? Stay tuned; it’s going to get worse before it can get better.