Tag Archives: unemployment

BT shares plummet 15 per cent as profits take a dive

BT shares have taken a harsh hit this morning as the company announces ongoing issues with their Global Services unit.  Shares in BT fell 15 per cent to 104.7p, causing BT’s market value to suffer a loss of £1.5 billion.

Between October and December of last year, BT’s Global Services unit was slapped with a £340 million charge due to financial reviews.  Profits for the unit were said to be significantly lower than the equivalent period the year before.  The third quarter to the last day of 2008 was expected to provide profits of around £17 million, however the same period of time a year earlier provided profits around £215 million.

The news follows an announcement by the company in November to cut the costs of its pension schemes and make 10,000 job cuts, 6 per cent of their overall workforce.  The announcement of job cuts will affect thousands in Britain, pushing the record breaking unemployment records even further towards the 2 million mark.  The Global Services arm of the company was said to be a means of growth for BT, however it is now proving to be a heavy weight pulling down the overall performance of the company significantly.

Ian Livingstone, the group chief executive, remains positive about the future of the company, stating, “BT remains committed to the success of Global Services, and I believe these changes will create a stronger business that can deliver positive cash flow and excellent customer service.  The performance of the rest of the group is ahead of expectations for the third quarter, but unfortunately this will be more than offset by the issues in Global Services.”

“The first job of the new management team in Global Services and the new group finance director has been to review the financial position of Global Services and its major contracts,” continued Livingston.

However, BT is not blaming the issue on the current economic downturn, but rather more simply on operational failures.  BT also claimed that they predict that the charges mentioned will be non-cash and the company’s final dividend would be promising.  BT is also predicting that the revenues for the Global Service arm of the company will rise by 15 per cent in the third quarter of this financial year.

“These ongoing reviews reflect changed circumstances and a more cautious view of the delivery of cost efficiencies and contract performance, particularly in the light of the current economic climate. We have also initiated a review of Global Service’s operations which will help us drive our cost savings initiatives.”

The other units belonging to BT that are expected to exceed expectations are the retail section, wholesale section and the Openreach unit.  These three units of the company are set to soar in the third quarter of this financial year.  BT’s share prices have more than halved within the last year when shares were priced at 245p.

Nortel files for bankruptcy as shares plummet 76 per cent

As the country falls further into a pit of economic despair, America’s leading manufacturer of telephone equipment, Nortel Networks Corporation has declared itself bankrupt, filing for bankruptcy only one day before an interest payment of $107 million was due to be paid.

The move comes after shares in the corporation dropped by 76 per cent and this has led Nortel to call for bankruptcy protection within the United States.  The company employs around 95,000 people around the world, 2,000 of those being employed within the United Kingdom.  However, the company are attempting to calm their employee’s nerves by announcing that Nortel was “still very much in business and our commitment to our customers remains unwavering”.  However, Nortel have announced that they will be dealing with their presence in countries outside Canada in “due course”.

The President and CEO at Nortel, Mike Zafirowski, said that the move was the best thing that Nortel could have done in their position, saying,  “I am convinced that by choosing this path at this time, we can put Nortel on sound financial footing once and for all.”  Zafirowski went on to announce that the move should allow Nortel to “emerge from this process as a more focused, financially sound and competitive company”.

The company has not had a good run of late, and on top of the drastic decline in the price of their market shares the company has recorded a loss of around $7 billion and due to this has had to lose 18 per cent of its employees.

A spokesman for the firm has stated that the company has been undergoing changes since 2005, however the company is now putting the bankruptcy claim down to the current economic crisis.

An analyst at DSAM Consulting in Toronto, Duncan Stewart, claims that the filing highlights the impending trouble the company was facing, saying, “Based on this filing, the board of directors must believe that not only is the fourth quarter bad, but that the first quarter is going to be just as bad or worse.  Although they have cash in the short term, even the medium-term outlook is not enough to make the company viable as a going concern.”

The company highlighted their need to take a step back to sort out their issues, saying, “The company acted now because we have sufficient liquidity to both run our operations and restructure our business,” to which Zafirowski added, “Nortel must be put on a sound financial footing once and for all.”

“The company commenced a process to turn around and transform Nortel in late 2005, and the company made important progress on a number of fronts. However, the global financial crisis and recession have compounded Nortel’s financial challenges and directly impacted its ability to complete this transformation. Nortel is taking this action now, with a 2.4 billion dollar cash position, to preserve its liquidity and fund operations during the restructuring process,” stated Nortel.

Barclays cut 400 IT jobs claiming the roles were “unclear”

Barclays have decided that they need to offload some of the IT jobs that they are deeming unnecessary.  Barclays are cutting 400 IT jobs as they claim the roles of the employees are unclear.  The move came after a review of the bank’s operations.

The bank released a statement on the subject, claiming, “Barclays continually reviews its operations and resources so that it functions as efficiently as possible as business needs and customer requirements evolve.

“As part of this process, we have identified some aspects of our technology operations where the organisational structure impedes performance, and roles and responsibilities for colleagues are unclear. In some cases, roles are obsolete or being duplicated elsewhere within the bank.  This will affect around 400 positions – 158 permanent staff and 250 contractors. All of the roles affected are UK-based, principally in Cheshire and London. None of the roles are being offshored.”  

Barclays are seemingly following their own trend as the redundancies come after the bank made 1,800 people unemployed in July.  Most of these 400 jobs that are being cut now will be felt in the Radbroke Hall in Cheshire and London as well as Poole and Northampton.

The joint leader of Unite, Derek Simpson, said that the announcement would come as a severe hit for the IT employees at Barclays.  He said, “At this time of economic uncertainty, staff across the industry are working under immense pressure and there is a great deal of nervousness regarding their job security.

“This loss of jobs, all of which are highly-skilled roles, is a serious loss to the UK’s skill base.  Unite will be working with Barclays in order to avoid compulsory job losses and looking to explore all the opportunities for redeployment. Over the next few days Unite officials will be meeting with our members at all the sites impacted.”

However, it is too early to see whether compulsory cuts would be included in this latest batch of redundancies, claimed a spokeswoman, saying, “We have just started the consultation process. There will be a number of options for the people affected, including voluntary redundancy and the chance to apply for other roles.”

Barclays is not the only company facing necessary employment shedding as Marks and Spencer has recently announced that they would be losing 1,200 employees, both companies putting the unemployment rates down to the recession.

Marks and Spencer have been praised for taking action on the issue, by analysts, yet an equities analyst at Hargreaves Lansdown Stockbrokers, Keith Bowman, said that the problems that the company were dealing with should not be brushed under the carpet.

“Consumers globally are in retreat, the dividend payment is still under review and the group’s expansion into small food outlets is now in tatters.  Competition will remain intense over the near term and the decline in the pound will be raising the cost of its imported products,” claimed Bowman.

Companies such as Marks and Spencers must be mindful in the wake of Woolworth’s collapse.

The world braces as Microsoft get ready to sack up to 17 per cent of their employees

It seems as though Microsoft is getting ready to let go of around 15,000 jobs around the world.  The job cuts would be the first that the highly popular company would have made since the company’s creation 32 years ago.

Microsoft currently employs around 91,000 people around the world, however, news is circling the world that Microsoft is planning on getting rid of between 10 per cent and 17 per cent of their workforce from around the world.

The news about the job cuts is said to come on January 15 and MSN and Microsoft EMEA are apparently said to be preparing to feel the worst effects of the job cuts.

However, criticism has been felt from all over the world as many people don’t believe that so many jobs will be cut.  Henry Blodget, a Wall Street Analyst, wrote in a blog that, “A cut of this magnitude seems highly unlikely, although the targeted areas do make sense.  Unless Microsoft’s business has been absolutely crushed in the past two months, there is no reason for the company to suddenly cut this much cost. The only way we could see Microsoft laying off this many people is if the company decided to eliminate business units.”

The news was first released on the Fudzilla website who claimed that the news was poised to be announced by Microsoft a week before the company’s second quarter earnings report on January 22.

Fudzilla said, “So far, we haven’t managed to confirm what departments or regions will be hit the worst, but we’re hearing that MSN might be carrying the brunt of the layoffs. We’re also hearing rumours about the possibility of somewhat larger staff cuts at Microsoft EMEA (Europe, Middle East and Africa).

“It’s unlikely that Microsoft will be laying off a lot of people in departments and regions that are doing well, and considering the recent upturn in console sales, we have a feeling that at least most of the people working in the Xbox 360 departments will be pretty safe,” claimed the site.

Then Henry Blodget went on to announce that the claims may be true, but again he does not believe that the number of employees losing their jobs will be as high as Fudzilla claims they will be.

“Unless Microsoft’s business has been absolutely crushed in the past two months, there is no reason for the company to suddenly cut this much cost. Microsoft’s margins are still fine, and much of its revenue is generated from multi-year contracts,”
claims Blodget.

If there are to be cuts then it does make sense to make the most of them in the MSN department considering how badly the department has done compared to other departments in the company.  The console department for example has achieved good results with its Xbox 360 and therefore relieving employees of their jobs would not be the most sensible direction for Microsoft to move towards.