Tech Companies Begin Trimming Head Counts

As the recession bites deeper, vendors are beginning to feel the pinch and are cutting staff.

Oracle (NASDAQ: ORCL) is reported to have trimmed one percent of its workforce, which totals 85,000 worldwide.

Meanwhile, Google (NASDAQ: GOOG) is reported to have laid off more than 5,000 contract workers, and Microsoft (NASDAQ: MSFT) is said to be planning cuts of 10 to 17 percent of its employees, for the first time ever.

Analysts expect more companies to trim their workforce because many payrolls are bloated.

Peter Goldmacher, of analyst firm Cowen, said in a research note that Oracle cut just over one percent of its workforce on Friday and that the layoffs were spread throughout the firm.

The cuts to the services group and the sales and marketing department were the most significant, although most of the sales and marketing staff cuts were in overlay and sales consulting roles, Goldmacher said in his note. The cuts could potentially improve Oracle’s margins, he added.

Oracle did not respond to requests for comment by press time.

In its second quarter earnings call in November, Oracle said that it remains well positioned against the competition despite the impact of the worsening economy and the strength of the U.S. dollar.

“All the technology vendors will probably be looking to optimize their staffing levels, Gartner analyst Kenneth Chin told “Over the past six months, we’ve seen dramatic company layoffs and unemployment increase, then the vendors will start cutting back as well because their customers will begin reducing their purchases.”

Giving the chop

Chin expects more staff cutting at large vendors like Oracle, SAP (NYSE: SAP) and IBM (NYSE: IBM) because of the recession. “I think there’s a dramatic overcapacity of technology in most companies today, with the workforce reductions and mergers and acquisitions and companies are going to cut back their technology spend in 2009 and probably 2010,” he explained.

Vendors need to slash their workforces more, Andrew Dailey, president of analyst firm MGI Research, told “If the cuts are anything above 7 percent they become meaningful; anything less than that is not, and, frankly, for most companies, less than 10 percent is insufficient.”

Oracle, Dailey said, is consistently among the top five software vendors in terms of being the most efficient. “It’s continuously managing its expenses and its head count so, for Oracle to trim one percent of its workforce is nothing.” He expects Oracle to continue managing its head count through the end of its fiscal year, which is on May 31.

Google’s layoff has sparked speculation on the Internet. According to AP, Google has trimmed a substantial number of temporary workers. However, Google would not say how many, and there is some confusion as to just how many people were laid off.

Reports on the Web vary. One report at hinted Google has actually trimmed its payroll by 6,000 workers and claimed that the search engine giant sought special exemption to keep its SEC filing from being circulated on the Web.

Jane Penner, Google’s senior manager for global communications, declined to specify how many of the company’s temporary workers did not have their contracts renewed, but told that such cuts are part of an ongoing move.

“We’ve been in the process of reducing our contractors for over a year,” she said.

Google spokesperson Matt Furman told in an e-mail that the company has not laid off any full-time employees. He also denied that Google sought to keep its SEC filing from being circulated on the Web by submitting it in paper — rather than in a digital format viewable online.

“The document at issue was filed with the SEC on paper, rather than electronically, because that’s how the SEC required it,” Furman said. “We did not have a choice and could not have filed it electronically.”

Reports of Microsoft’s plans to trim head count are surprising as, during its first quarter earnings call in October, it predicted revenue would increase during the coming quarter.

A spokesperson for the Redmond giant declined to comment on the reports.

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