It's possible these days to avoid reminders that the economy is falling in on itself like a dilapidated beach house, but you really have to make an effort. As the Big Three automakers continue to lurch toward a possible bailout settlement, the cloud of financial unease drifts outward to engulf anyone in America who drives a car. Meawhile, in tech, consumer spending for electronics is down, and some big-name companies are shedding workers for the sake of their EPS, or earnings per share, measures.
Motor trends
The executives of Ford, Chrysler and GM were back in Washington this week, pleading their case for a bailout -- a bigger bailout, in fact, than they were asking for two weeks ago. In mid-November, the automakers sought $25 billion, but they've since increased that figure to $34 billion.
What would we get for our money? More of the same, it seems. Each company promised to prune its product lines, but offered nothing in the way of true innovation as concerns alternative fuels or carbon emissions. The executives drove to Washington this time, rather than flying in private jets, suggesting that at least they understand basic PR. Still, the signs are abundant that there's a lot the corporate heads in Detroit just don't get.
The mood of the hearings on the bailout was quite negative, by all accounts. Many senators were visibly angry at the thought of funneling more tax dollars into private companies, particularly ones that have had numerous opportunities to reverse their destructive habits before now. However, Senator Bob Casey of Pennsylvania seemed to recognize that more was at stake here than principle. "For me, this debate is pretty simple," Casey said. "As complex as the financing, as complex as the challenges are, it's about jobs."
Senator Chris Dodd of Connecticut added, "We're looking at a death sentence here if we don't respond."
Bigger is better? Not necessarily
Ex-auto, the Consumer Electronics Association (CEA) issued a press release revising its fourth quarter growth predictions for the consumer electronics industry to a flat 0.1 per cent increase compared with 2007, down from an earlier estimate of 3.5 per cent growth. The reason for the change is simple: consumers across the country have realized lately that they can't continue to spend like there's no tomorrow.
According to CEA, unit shipments of flat-panel TVs were up 22 per cent in October from the 2007 figures, but those revenues have since fallen as consumers turned to smaller, less expensive TVs than they did last year. Elsewhere, many people are holding off on getting new cell phones, which has forced carriers to cut prices. The combined decline in unit sales and per-unit revenues has cut projected growth by more than half, from 11 per cent to an anticipated five per cent.
Over in the computer market, the same patterns have emerged. Low-cost netbook computers, with their razor-thin profit margins, are generating interest this holiday season, leaving the larger, more profitable systems sitting on store shelves.
In defense of its initial estimate, the organization pointed out that "although CEA certainly took price declines and weakness in consumer demand into consideration [for the initial projection], the severity and the speed of declines in these unprecedented times caught everyone off guard."
Tech layoffs show no signs of stopping
In other contraction news, AT&T announced plans to cut 12,000 jobs, some right away and the rest over the next 12 months. Most of the casualties will be from the company's wireline division, which is shrinking rapidly as customers go wireless or digital. (AT&T anticipates reaching the million-subscriber mark for its U-Verse broadband platform in the fourth quarter.)
On Wednesday, Adobe Systems announced a layoff of 600 people, about eight per cent of its total workforce. The cuts are "in progress," according to a report in the San Francisco Chronicle, and "will affect all regions and business units." Adobe Creative Suite 4, the new version of the company's flagship software package, hasn't sold as well as expected. The company hopes to make 45 cents per share for the quarter, but apparently that isn't enough to keep the family together.
Some other things to worry about
In between grim economic news, we've lately been hearing some discouraging things about tech security. The Electronic Frontier Foundation was recently in court to face the United States Department of Justice, which was petitioning the judge, Vaughan Walker, to toss out the EFF's class-action suit against AT&T regarding the carrier's cooperation with the government in providing phone records of its customers to the National Security Agency.
The DoJ claims AT&T can be granted immunity from any suit under the FISA (Foreign Intelligence Surveillance Act) Amendments Act passed last summer. EFF attorneys argue that the Amendments Act is unconstitutional and that AT&T's ongoing actions were illegal and not eligible for immunity. As EFF attorney Cindy Cohn said, "You don't need immunity if you haven't done anything wrong."
Kind of a Ross and Rachel thing, in that neither party is especially likable
The Microsoft-Yahoo! soap opera (unnamed as of yet, though I prefer the portmanteau of the moment, Microhoo!) recently entered its third season with whispers out of London that the two companies were again in negotiations. Yahoo! was said to be interested in selling its search business to Microsoft.
Those rumors turned out to be unfounded -- probably. Yahoo!'s loudest shareholder, the billionaire financier Carl Icahn, flatly denied the story on CNBC on Wednesday. "There's nothing imminent now," Icahn told Maria Bartiromo. "There's nothing, no discussions that we're having now that I know of." Sure, you say that now, but wait until Steve Ballmer blurts out Jerry Yang's name at the altar.
