The Ominous Sign Of Laying Off People At Profitable Companies (DELL)(MSFT)(GOOG)(MOT)

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Motorola (MOT) will lay off 4,000 more people this year. In the fourth quarter, it sold only half as many handsets as it did in the same quarter a year ago. The decision makes sense even if it is gutting the company. Motorola may not be able to stay in business beyond the middle of the year.

The other news about jobs cuts in the last day is that many are happening at companies which are profitable, and, in some cases, remarkably successful.

Dell (DELL) may take out more people according to industry rumors. It is certainly making staff take forced vacations. Dell does make money and has a healthy balance sheet, but recent industry figures show it lost a great deal of market share in the last quarter of 2008.

Google (GOOG), which, by some measure is the most successful technology company in the world, laid off 100 recruiters. That may not seem like many people, but when the HR departments begins to disappear, so does the hiring. Most media reports say that Google is quietly cutting staff and leaving office space it rented only a year ago.

The most stunning report about job cuts is that Microsoft (MSFT) may prune several thousand people. According to The Wall Street Journal, "the Redmond, Wash., giant is considering layoffs across its various divisions, a rare occurrence for the world’s largest software company". There are only a handful of companies in the world with Microsoft’s cash balance and the ability of its operations to add to that significantly every quarter.

In a recession, it is expected that firms which are on the ropes will make large cuts. It is less frequent when extremely successful companies start to throw people out. It is a sign that, even with all of their financial strengths, they see the recession extending long and deep.

Cuts by healthy companies may be a much better leading economic indicator that layoffs at firms which may not make it at all.

Douglas A. McIntyre

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