Results 1 to 1 of 1

Thread: weekend commentary - economy turns against hi-tech business too !

  1. #1
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default weekend commentary - economy turns against hi-tech business too !

    (snip)"The memo -- known as "The Peanut Butter Manifesto" because it argues that Yahoo's investment strategy is like spreading peanut butter too thinly on bread -- argues for a "radical reorganization" of the 12-year-old Internet media giant.

    JOB CUTS URGED

    "I hate peanut butter," Garlinghouse writes.

    The Yahoo executive said the company should cut its work force by 15 percent to 20 percent as part of a plan to reshape the current business unit structure and eliminate the bureaucratic duplication of functions that exist across Yahoo.

    The Sunnyvale, California-based company has nearly 10,000 employees worldwide.

    "There are so many people in charge (or believe that they are in charge) that it's not clear if anyone is in charge."

    "I believe we must embrace our problems and challenges and that we must take decisive action," the memo states bluntly."(snip)


    Yahoo obviously wasn't the first high-tech company to experience a turnaround. However, the Yahoo versus Google story does point out some huge differences between companies involved in 'smokestack' industries and companies involved in 'high tech' industries.

    - with a 'smokestack' industry, in order to actually compete in that business segment, that potential competitor has to invest billions of dollars and several years worth of design and installation work into new plant and equipment in order to produce a product to sell. This 'initial investment' hurdle insures that only 'serious' competitors can obtain financing, and that those competitors are viewing the business at least in terms of their 20-30 year bonds. However in the software / internet segment of 'high-tech' business, where the 'product' is an original idea and where the 'business' is a service, the only real investment required to offer that service is an office building and a web server farm - which can be set up in a matter of months rather than years - anywhere in the world. This leads to the fates of 'smokestack' industries having lots of 'inertia' with rises and falls happening gradually, whereas the fates of software / internet businesses can turn extremely quickly for the better (Google) or for the worst (Yahoo).

    - the 'rapid growth' phase of 'smokestack' industries ended decades ago, when the point was reached that everybody traded their horse and buggy for a car, everybody traded their icebox for a refrigerator, everybody traded their radio for a color tv etc. The 'rapid growth' phase of hardware related high-tech industries also arguably ended recently, as everybody who wanted a microwave oven, home computer, cell phone, satellite dish etc. now has one. In both cases, once the 'initial demand' was satisfied, the market then migrated to 'replacement / upgrade mode' at far lower levels of demand. Yahoo's 'Peanut Butter Manifesto' is indicative of the same thing having happened regarding the stagnating growth of the internet ... at least as it applies to the growth of English language speaking internet surfers who have money to spend.

    - with the end of the 'rapid growth' phase, and with it an end of 'investor fever' which allowed these companies to 'trade' new stock shares for investor cash at will (arguably a de-facto license to print their own money), it appears that high tech businesses of all segments are now dealing with the realization that the 'money raining from the sky' business model of previous years must now be changed to one of efficient, profitable business management in order to successfully compete in a slower growth, maturing market where effective competition now exists. This in turn will mean that management attention will turn to worker productivity and pay rates, tax and benefit cost levels etc. - which of course bodes ill for Silicon Valley.
    ~
    Last edited by Melonie; 11-18-2006 at 11:16 PM.

Similar Threads

  1. Replies: 2
    Last Post: 11-15-2011, 02:43 PM
  2. Replies: 0
    Last Post: 07-11-2008, 10:58 AM
  3. weekend commentary - the 'Rentier' economy ...
    By Melonie in forum Dollar Den
    Replies: 0
    Last Post: 03-04-2007, 09:57 AM
  4. Replies: 0
    Last Post: 12-03-2006, 08:10 AM
  5. Yet more weekend commentary on US economy ...
    By Melonie in forum Dollar Den
    Replies: 1
    Last Post: 01-08-2006, 06:31 AM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •