A report from the National Association of Realtors says that home sales were down 3% in October, and median home prices dropped 11% since October 2007.
Astonishingly, nearly half of homes sold in October were the result of foreclosure.
“Many potential home buyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions,” said Lawrence Yun, the association’s chief economist.
The NYT says that tech companies had hoped they were skiing in front of the avalanche that’s claiming the rest of the economy. Clearly they got caught in the carnage, judging by all the layoff announcements in the past month. Tech Companies, Long Insulated, Now Feel Slump.
In the span of just a few weeks, orders for both business and consumer tech products have collapsed, and technology companies have begun laying off workers. The plunge is so severe that some executives are comparing it with the dot-com bust in 2000, when hundreds of companies disappeared and Silicon Valley lost nearly a fifth of its jobs.
Of course, this didn’t come as much of a surprise. Every tech CEO has been watching over the past year as financial markets collapsed and spread through the general economy. Like time slowing down in a car crash, we all knew it was going to hit us, and there was nothing we could do to stop it.
The tech industry is getting hit from two sides: consumers and corporate customers are holding off on purchases due to economic uncertainty. And since credit markets have frozen up, tech companies are having a hard time financing operations.
But the NYT article ends on a somewhat optimistic note. We’re all getting hit hard, but high-tech is still doing better than other industries.
For all the gloom, the tech industry is still far healthier than Wall Street. Unlike the banks, many technology companies are flush with cash. Cisco has close to $27 billion; Google, $14 billion; and Apple, $24 billion. It is likely that some of these funds will go toward acquiring struggling competitors. “The guys that aren’t as strong will be good pickings,” Mr. Coleman said.
Powered by technology, Silicon Valley has stood out as a bright spot for jobs in the United States, with employment growing at about 2 percent a year while national employment slowed. Through 2007, the region continued to add 20,000 jobs, although that positive trend has started to change.
According to a new report from Challenger, Gray & Christmas, the tech sector has announced 140,000 layoffs as of Oct. 31 of this year. They predict the industry might cut 180,000 jobs by year’s end. John Challenger suggests that Cisco, Nokia, and Qualcomm might all announce layoffs this year.
That would make 2008 the worst year since 2003, when the industry cut 228,300 jobs. Yet it’s much better than at the depths of the dot-com implosion. In 2001, the tech industry lost almost 700,000 jobs. Compare that to 107,000 layoff announcements in 2007, or 175,000 in 2005.
Sun Microsystems to lay off up to 6,000 workers
In one of the largest tech layoffs announced this year, Sun Microsystems said today that it will lay off between 5,000 and 6,000 workers, more than 15 percent of its global workforce, over the next year.
An amazing experiment to map the spam economy – by hijacking 75,000 computers in Storm Worm’s botnet! Surprisingly, researchers estimate that spam campaigns still earn a profit, even at a response rate less than 1 in 107!
Researchers Hijack Storm Worm to Track Profits
A single response from 12 million e-mails is all it takes for spammers to turn annual profits of millions of dollars promoting knockoff pharmaceuticals, according to an unprecedented new study on the economics of spam.
The research team estimates that about three-quarters of all e-mail sent by the Storm worm was snagged by junk e-mail filters, ISP blacklists, and other e-mail security applications.
“Under the assumption that our measurements are representative over time, we can extrapolate that… Storm-generated pharmaceutical spam would produce roughly $3.5 million dollars of revenue a year,” the team concluded.
“By the same logic, we estimate that Storm self-propagation campaigns can produce between 3,500 and 8,500 new bots per day.”
Chip companies, amid slackening demand, lower forecasts and cut jobs
Intel of Santa Clara, [...] significantly scaled back its estimate for fourth-quarter revenue. Instead of the $10.1 billion to $10.9 billion it predicted it would take in, the company said it now predicts its revenue will be closer to $9 billion, plus or minus $300 million, a drop of at least 8 percent.
Applied Materials of Santa Clara, [...] said its profit in the most recent quarter was 45 percent lower than for the same period last year and announced it will trim 1,800 positions, or about 12 percent of its workforce.
Citing weak demand for cell phones and other gadgets that use chips, Santa Clara-based National Semiconductor lowered its sales forecast by at least 9 percent for the next quarter and said it will reduce its roughly 7,000 positions by about 330.
A month ago, when it reported third-quarter revenue of $10.2 billion, Intel predicted its business would stay flat through the fourth quarter. But Paul Otellini [...] promised to provide analysts with an updated fourth-quarter forecast on Dec. 4. Intel chose to provide that revised forecast Wednesday because mounting evidence had made it clear the company’s previous estimate was far too optimistic.
“We saw in just the last few weeks a really rapid deceleration in demand and that’s what prompted the update now,” said spokesman Chuck Mulloy. “We just decided, ‘Why wait until Dec. 4. We know what the answer is now.’ “
Chip Maker A.M.D. Cuts 500 Workers
Advanced Micro Devices said Thursday that it would cut close to 3 percent of its staff [...] The layoffs will affect close to 500 workers, leaving A.M.D. with about 14,960 employees. [...] It plans to have the majority of workers stay on at A.M.D. to handle processor designs, while roughly 3,000 employees will head to a new manufacturing operation jointly owned by A.M.D. and investors backed by the Abu Dhabi government.
The NY Times reports that some big investors have not been able to meet capital calls from venture firms: Cash panic sweeping VC industry – The capital calls problem. That’s likely to squeeze the Silicon Valley startup economy even more.
VC firms typically make “capital calls” to these investors whenever they need more money to pump into their startups. However now rumors are circulating that Columbia University’s endowment fund is illiquid — that is, it can’t raise the cash it needs to fund current commitments. Harvard, meanwhile, is reportedly trying to sell a third of its private equity portfolio at a steep discount in a “secondary offering.”
VentureBeat recently held a roundtable discussion on the economic downturn, and its effect on Silicon Valley.
“There’s something going on here other than subprime mortgages,” said venture capitalist John Doerr, [...] “We’ve not only got a debt crisis but a crisis of confidence . . . With the current level of uncertainty, it’s really hard to forecast what’s going to happen going forward,”
Angel investor Ron Conway thinks it could be at least two years before “the storm” ends, in which case any company with fewer than 6 months worth of cash, needs to either sell out, get a bridge loan, or “prepare for an orderly shutdown.”
Sequoia Capital hosted a big meeting with their portfolio companies a few days ago. Today someone posted what he says are the slides of their presentation. It’s an analysis of the trends that got us into this financial mess, and some brutal recommendations to startup companies: Sequoia Capital on startups and the economic downturn.
Om Malik at GigOM posted more details about meeting today. He says general Partner Doug Leone advised startups:
- Unprofitable companies would have a tough time raising cash, so get cash-flow positive as soon as possible.
- Cutting deeper is the formula to survive, and this is an era of survival of the quickest.
- Make sure you have one year’s worth of cash.
- If you have a product, reduce expenses around it and boost sales. If the product is ready, cut the number of engineers.
- Focus on building the absolutely essential features in your product.
- Be brutal when it comes to marketing — anything that isn’t working, cut it.
- Don’t burn through your cash, for cash is king