Silicon Valley is not recession-proof

December 10, 2008 12:00:00 AM PST
When the nation's financial trouble started, back in late 2006, early 2007, some economists speculated, Silicon Valley would be OK. Recession-proof, some called it, but after Wednesday, that's not how it is.

On Wednesday, Yahoo passed out pink slips to 1,500 people. The Sunnyvale-based company is trying to save $400 million.

As Yahoo employees leave, some with pink slips in hand, they face the harsh reality that Silicon Valley is not immune to the global economic crisis.

"It's a really sad state," said Seema Mysore, a Yahoo employee.

"It's a tough time," said another Yahoo employee.

Yahoo is cutting 10 percent of its work force. It's something very few would have predicted, earlier this year.

"In 2008, companies still plan to add jobs here or at least keep their base here," said Carl Guardino.

It was in January when Guardino of the Silicon Valley Leadership Group, re-affirmed the area's strength. Ten months later, as South Bay companies close and dissolve jobs, the once optimistic are now realistic.

"This is going to be a hard time. As this has turned into a global downturn, that means the impacts, regrettably, on Silicon Valley have only deepened," said Guardino.

The majority of Silicon Valley company business comes from overseas or the financial sectors. When those markets or institutions stop buying, sales go down, profits fall, and downsizing occurs. Those at Yahoo are feeling that ripple effect.

"Every company is going through this kind of restructuring," said Umesh Rathod, a Yahoo employee.

According to San Jose State University assistant professor of finance, Marco Pagani, Ph.D., Silicon Valley companies need to follow the recovery model many used after the dot-com bust in 2000.

"What they've learned is as soon as you've forecast a decrease in your business, you should address it right away, you should take action to minimize the impact," said Pagani.

That could mean a change, which isn't always bad. It's seen as an opportunity for a line communications company called Tok Box. It needs employees so on Wednesday they started recruiting, right outside Yahoo headquarters.

Click here to read a post Yang published to Yodel Anecdotal, Yahoo!'s corporate blog, about the layoffs that are currently underway.


Load Comments