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Some Facts About US Economy

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The economy in the previous year has grow by 10% whereas this year the growth has been 1%. Note that there has been no negative growth. This again is mainly in the areas of manufacturing and retail, areas that touch the common man like automobiles, supermarkets etc.
In the USA corporate organization are mainly driven by Wall Street projections. Hence if a company is not able to meet Wall Street projections in a particular quarter the share prices get driven down. There is a lot of panic reaction on the part of organizations which does not necessarily reflect the ground reality.
Lay Offs announced by Dot Coms and some blue chips like Lucent and Motorolla have made headlines. Lets look at this from a more objective point of view:
1.. Dot Com failures:
As you are aware a number of dot com's came into the market without a realistic business model and without solid foundations, it was a question of time before they crumbled. The Dot Com employers also gave fancy stock options, great salaries, good designations and a great work environment and hence attracted a lot of talent. Unfortunately it needs more that just this to run a successful organization. Hence the failure was more because of the shallowness of their business models and not related to a slow down of the economy. The dot com bubble would have burst irrespective of who is in the Government and irrespective of a slowdown in the economy or not.
2.. Lucent:
Lucent is a brand name that we all know so well and have grown up with a positive feeling about this company. Who can forget AT&T bell labs and their inventions. So when their share price plunged from the $90 range to under $10 it was a rude shock to everyone, they slashed work force by 10000. Where did the slash and what was the reason. Lucent as an organization is a huge in size and this elephant failed to note the changes happening in the market - the biggest opportunity they missed was Optical Networking - an area which was seized by smaller start ups like Juniper Networks - check out on Juniper's share prices and their employment growth,it is zooming upwards. Now in corporate America if you make such mistakes,you have to pay a price. Why in the USA, anywhere in the world? Lucent also made a number of very bad decisions including buying other organizations for huge prices, unfortunately the organisations they bought were simply not worth the price they paid for or were not the right kind of companies to buy. Lucent is paying the price for these mistakes and they would have paid for these mistakes in any situation and under any administration - whether George W Bush ruled or Bill Clinton ruled really does not matter.
3.. Motorola :
One of the mega failure in this decade is from Motorola and their Iridium project where they promised a global mobile phone providing audio, video and data at high speeds anywhere in the world and towards this pumped in millions of dollars and sent up 68 satellites into the sky. The project turned out to be a utter failure. Now there is a price that one has to pay if you make wrong business decisions like this.
4.. Politics :
President George W Bush made a statement about the economy becoming slow and predicted that this would continue. Now for the first time in an official mail I am making a political statement and hopefully this is the last time I am doing so. If you remember the Presidential debates between AlGore and Bush. It was widely expected that Bush been an average speaker will do terribly vis a vis Gore. The Bush team positioned him really well,they joined analysts in painting a bad picture of how Bush would fare in the debates. In fact they helped the public to form an opinion of not expecting much from Bush in the debates. When Bush did reasonably well, the public felt that he did tremendously well. Similarly it makes sense for Bush to predict a bad economy before he takes over as President that way he makes it clear that he is not responsible and also this situation helps him to get the public and the senate behind him in getting the huge tax cuts he has proposed, passed in a split house. Let us look at the other side of the coin now. Many organizations have done really well and their business modelsare looking brighter than ever.The organizations are:
An online auction house which is the darling of the stock market. One of the dotcom's that succeeded. They had a unique business model and a first mover advantage. They bring millions of buyers and sellers from all over the world online at the same time which no business can do. They also worked out a realistic business plan and planned for a break even four years from start. They were focused in their approach and have turned around in their fourth year and have shown profits. The stock market has rewarded them handsomely and they have not announced lay off's. In fact they are hiringaggressively.
Has reported a profitable quarter and two of their lines books and music is doing really well.
Juniper Networks: We spoke about this coming while talking of Lucent and its failure.
Compaq: A couple of years ago when the economy was really doing well, Compaq bought two organisations, Tandem and Digital - at that point of time they had bitten more than what they could chew and had a lot of trouble integrating these huge organisations. The market felt that this decision of Compaq was not right and their stock price got hammered and they laid of thousands of people. They have not set right their problems and their share price has bounced back and this is one company that has not cut down anything.
7.Siebel BEA:
In fact Bill Coleman the Chairman of BEA has made the single largest donation of $250 million this year. The highest by an individual. Cadence Design...... and so on. In fact the Nasdaq surged when the results started flowing in about success stories from these organizations.
This I hope gives you a perspective of the shape of things as they are today and not get carried away by the negative hype that is currently been circulated.
I have got these informations from a discussion forum in i guess it is worth to read..
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I am hoping your assessment of the job situation is correct - no negative growth. What I am seeing so far (only been in job search game about a day now - and spent most of it fly fishing) is a transfer of talent from one company to another.
I think the H1B people are getting hit hard.
But, the job boards for Denver are screaming for talent in the 2+ year range. And it's across the entire IT spectrum (Help Desk, VP/CIO, Java, C++, Networking, etc). So I am hoping that it's just a shift in talent. Boy am I ever hoping
Regarding politcal statement (Gorge vs. Al) - I am going to stay out of this one.
Regarding Lucent (I worked there for 6 months). I think they way overhired. AT&T used to do the same thing - hire for 3 or 4 years and then have a layoff. Also, Lucent (at our monthly pep rallies) would promise 20-30% a year growth. When they predicted a 10% year growth (still pretty darn good), they panicked and had a layoff (which I got caught up in - 1999).
Also, their business is extremely cyclical (up/down). If you sell someone a switch this year - you have an up year. But that switch is going to last a few years - so your customer is not going to replace it. So you have a down year - perhaps many. Switches (a very-very big part of Lucent) are not toilet paper - you don't have to replace/resell the item every 30 days.
I was in the software-maintenance side of the Phone Loop Testing System (tests the phone line - which is actually a wire loop). So I was hoping I could ride out some of the ups-downs.
I am hoping again that this stock market downturn is just going to be temporary. Hopefully, other companies will fill the gap of the dot-coms. Whether it's brick & mortar or Internet - who knows. And if this happens, well then the economy will get the kick in the pants/boost that it needs.
Gotta run.
John Coxey
I do some of my very best work in water. Like this tiny ad:
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