The biotech discussion was too far along to parse it from the rest of the Palms discussion, but we will redirect a reader’s no comment comment about Google:
No comments about Google today? Weird. It seems that for every company on the ropes there is at least one that is doing ok. How did they do it? Can they continue?
Also appears that a lot of companies in the valley, like Google, are taking steps to actually retain employees instead of shed them (option repricing). Although that usually resets the vesting period it can still do a lot for morale. Thoughts?
∙ A SoMa/Palms Wake Up Call (And Apple): 555 4th Street #401 [SocketSite]
∙ Google Profit Tops Estimates as Web-Ad Sales Rise [Bloomberg]
∙ The Google Chart Of The Day (And A Bit More Foreshadowing) [SocketSite]
“How did they do it?”
They shrunk the company by a lot of contractors, that’s how. All out of work. Those contractors did the unpleasant work while the google employees had all the fun. Now, with no contractors, the employees have to do the grunt work and they aren’t sticking around. And the word on the street is they are about to axe a bunch of employee engineers.
“It seems that for every company on the ropes there is at least one that is doing ok.”
Um, no. Intel, AMD, Microsoft, all laying off. Smaller companies you don’t read about are crashing too.
And Google dropping thousands of contractors isn’t “doing OK”. They are still profitable, yes, but if they lay off thousands, how does that benefit housing? It hurts it.
Also appears that a lot of companies in the valley, like google, are taking steps to actually retain employees instead of shed them ( option repricing ). Although that usually resets the vesting period it can still do a lot for morale. Thoughts?
google laid of about 6,000-10,000 “contractors” recently, as well as up to 500 recruiters. They used a loophole to not disclose this to the SEC. thus nobody knows how many they’ve let go. they used to have up to 30,000 employees. now they have 24,000 (depending on how you count) and have plans to let another 4,000 go.
this week they also announced the layoffs of 100 more recruiters AND will close 3 offices (Austin, Trondheim, Lulea… these were in addition to the Dallas and Denver closures earlier in the year).
http://www.webguild.org/2008/11/google-layoffs-10000-workers-affected.php
http://www.webguild.org/2009/01/google-layoffs-6000-gone.php
===
I’ve said this before:
being “innovative” is not the same thing as bringing in money.
Being “profitable” is not the same thing as increasing salaries/benefits/bonuses.
Much of tech was extremely innovative in the late 1990’s, and not profitable at all. but many SFers made BIG bucks back then despite no profits due to venture capital, IPO’s, stock market mania. now, tech is still innovative, and even profitable… but no bubble mentality like there was.
Google is a VERY strong and VERY innovative company. but it is no longer a new company. It is slowly maturing into a Microsoft (is that really that bad?). it is under financial market pressure, and thus is DOWNSIZING (quietly). This is of course no surprise. Google is an advertising company wrapped in a tech blanket. it had lots of non-profitable side adventures that will now need to be weaned. We’ll likely have a leaner meaner Google
Apple is a BIG POSITIVE story in tech right now, and blew away estimates but they always forecast low and blow away estimates. i won’t minimize their quarter though, it was stellar. They have 2 issues. 1: Steve Job’s health. 2: their product line is getting a little long in the tooth. how many iterations of the Ipod can they come up with? Already it’s the LOW PRICE iPods that are really selling (they are selling higer volumes of lower margin products… they sold 3% more ipods, but revenue down 16%). iPhone is very cool. but its margins are also shrinking. (who pays $500 for an iPhone these days?). the bright and shiny product for now is the iPhone (volume up 88% but lower margins again) and the notebook computers (good volume and good margin). Mr. Jobs better get a new product out there soon. That said, if there’s any company that can do it, it’s Apple.
Microsoft laying off 5,000
Intel ceasing production at 5 plants
Ebay’s profits are shrinking.
HP/Dell under pressure.
I believe Amazon did wonderfully over the December holiday. not sure how they are doing overall, I haven’t been studying them. I have friends there and things aren’t sounding the greatest… but I haven’t read anything on them in a while. I think they’re pretty solid.
in general, tech will do ok relative to other industries. but it’s going to be leanear and meaner, just as what happened with the last recession. certainly will put a $1M condo further down the list of “must do’s”
or don’t you think those 10,000 available google employees and 5,000 available Microsoft employees etc won’t put downward pressure on salaries/bonuses.
everybody can’t jump to Facebook and Twitter and Flickr.
TechDefender, you boosters hoping that “tech” will be the magic bullet to save housing prices reminds me of Southern Californians who claim on other sites that the entertainment industry is “recession proof” so prices are “coming back up”. This is not the typical downturn, and “tech” is not immune.
The great thing about google is they can do their thing with far fewer employees, if necessary.
The option repricing is pretty hilarious for google shareholders, most of whom have no idea they actually have no voting rights already!
Most interesting thing I read in that Google article –
“Option Exchange
Google also said it will offer employees a stock-option exchange, an effort to retain talent. The program would let employees trade their options for new options with an exercise price equal to the closing price on March 2.”
Interesting.
Sorry about interrupting the other thread. I just don’t think anyone expected good results from this company in these times. .
ex SF-er, Ill see your Microsoft and raise you an IBM. I think it would be a mistake for any company not to trim the fat during this downturn so what is surprising to me are the companies that have not yet announced any layoffs/closures.
“in general, tech will do ok relative to other industries.”
Obviously we agree on most of this stuff.
Tipster, this might be a stupid question but would the layoffs impact last quarter’s results? Wouldn’t the contractors have already been paid?
Google is not doing ok ? Seems absurd to me. If the small companies you speak of are anything like that youtube rip off you posted on here a while back I can understand how they would be on the ropes.
How well any company is “doing” is irrelevant with respect to bay area real estate. The only thing that matters is how much of their money they are handing out to people in the bay area.
If they are laying off contractors, handing out phones instead of millions of dollars in bonuses, and now laying off employees, it really doesn’t much matter if their profits are up, down or sideways, it’s going to hurt bay area real estate compared to the days when they were minting millionaires. And to answer your question, when they start laying off contractors, those contractors aren’t going to rush out and pay bubble prices for homes everyone knows are crashing.
IBM pays like crap and gives very few stock options. If they are doing well, it helps their stockholders, but not many people around here.
Keep trying, though. It’s funny to see you reaching like bringing up IBM.
tipster, you are a trip the way you are all over the place.
ex SF-er, had the chance to read your links. I am surprised you are citing blogs like that for your numbers!
No, Trip is a different poster.
BTW, IBM – massive layoffs starting tomorrow and continuing for weeks. They continue to transfer work OUT of north America and IN to India. Again, their positive results are not helping bay area real estate. Go out and buy India real estate if you see them doing well.
Google is doing well – it’s turning a profit. While those profits have declined – and may well decline further – the management seems to be aware of the economic headwinds and cut expenditures accordingly.
Google certainly fancies itself a tech company. In fact, the technology it invented and continues to innovate is useful to consumers, but it is equally profitable to advertisers. In effect, Google is the new advertising world.
Before anyone considers me a tech-defender (and I really see advertising as the story here, as well as reasonably shrewd management), it’s important to remember that Google is distributed quite widely. According to their statement of earnings, more than half of their income is derived outside the US. Google’s good performance is highly unlikely to prop up any housing market.
Tipster – these companies that you mention (Microsoft, Intel, Google) are *not* crashing. They are facing significant headwinds and are reacting accordingly. Intel is clearly facing a downturn, one that began way before the financial meltdown.
I’m no pollyana, but there is a difference between, say, RBS (which *is* crashing) and Microsoft/Google/Intel. If any of you bought real estate in Edinburgh as an investment, I suggest you begin lowering your rents and looking for new tenants.
ex SF-er, had the chance to read your links. I am surprised you are citing blogs like that for your numbers!
techdefender:
I can’t win with you.
If I use a financial journal you say “well, what do they know?”
if I use the tech blog that sorta “broke” the story, then you question the source.
How about this:
story also broke by San Jose Mercury
and confirmed by Google itself (the 10,000 contractor number, and the fact that it would be “significantly” reduced”
The stories about office closures were released BY GOOGLE ITSELF.
You can also read their financial reports as I have.
Or just talk to Google employees, as I have.
as I said earlier, it is difficult to understand how many people have been laid off due to the secrecy surrounding this.
is cnet good enough?:
http://news.cnet.com/8301-1023_3-10107141-93.html
“Google is doing well – it’s turning a profit.”
When revenues shrink, but head count shrinks even more, profits can go up.
However, it doesn’t help the local real estate market.
The only reason Google’s profit was down was because they decided to use this quarter to write down the value of some of their investments, mostly the AOL one.
If you pull out that write-off, their profit was $1.4B, up 23% YoY. Google’s revenue is also going up, 18% last quarter.
How does office closing in Austin impact the local economy?
They are laying off contractors, but hiring full-time staffers, which is a smart move in this economy. They just expanded the SF office.
I don’t think Google is shrinking its Bay Area workforce at all, but I honestly don’t have enough visibility into the company to know. They have at least a hundred openings in Mt. View right now.
Woo hoo! A *hundred* openings! They’ve laid off thousands of contractors in the bay area, valleywag.com says they are about to lay off about a thousand engineers, but they have 100 job postings!
Wow!
“is cnet good enough?:”
You asked. . . .its debatable! (btw, I don’t think ive ever questioned a financial journal). That story posts back to the webgui1d story(which again links back to cnet) and then links to a non-existent sj mercury story (and so does every other piece citing 10000). Regardless, its irrelevant. Sure the layoffs are bad for the local economy; As for housing- would 1099 contractors be able to qualify for a loan these days even if they HAD a job?
Everyone near the 101-85-237 corridor is shrinking head count (YHOO, MSFT, GOOG, CSCO, INTC); if you worked down here you’d know. The fact that Google can mask it by getting rid of 10k contingent staff is not relevant. Google’s Q4 FTE headcount increased by less than 100 employees; not all in the Bay Area. Google over-hired from 2004-2007 and they have admitted as much. Large tech companies like Google will force out the poor performers via reviews; these won’t be considered layoffs.
The end of the downturn will come when there are no “positive stories” left.
Google’s already heading down, Apple’s next. IBM & HP will follow.
Really, the only positive stories were pawn shops, and Cash America even was hurting this past quarter.
Biotech’s already on life support, praying that pharma will rescue them, and they will, just not all of them, and at firesale prices so that those newly unemployed biotechers (most likely including me) will still need to look for new jobs, immediately (i.e. we won’t have cushions or cushions big enough to “consult” for 2 years while the economy turns around).
So, hopefully we’re marching closer to the inevitable immolation that will burn everyone but those who have capital to survive, and then the rest of us will all have fun starting over, yet again (for a guy like me at least who’s been through 1.5 years of looking for jobs in the past 6 years, for a nice 25% un/underemployed to employed ratio).
The lessons are manifold:
1) Don’t overextend yourself. That nice $2000/month 4 br house in the East Bay (yeah, that’s my mortgage) and 25 minute, less than $4 Bart ride to SF looks a lot better than a $6,000 mortgage when you’re staring at ANOTHER 6-12 month unemployment stint. This goes with another corollary, if it costs too much, don’t buy it. My 126,000 mile Toyota with no payments also looks a lot better than a $200+/month lease (rent) payment.
2) The Bay Area is, and has always been HUGELY cyclical. There’s NO “safe haven” in recessions. Period. Tech spending? What a joke. Biotech? Ditto. Real estate? Always goes up, right? The only haven is a gov’t job.
3) SAVE your excess capital in good times. You DO have surplus capital, don’t you (see #1). BUY in BAD times. There are oodles of cash-flow positive properties now in Oakland. I’m actually looking to raise money to buy more. This is a good hobby when you’re out of work in bad times, and could even support you eventually.
You are all delusional if you think you’ll be safe during this downturn. There is no safe spot (except gubmint).
Google’s Sequential Headcount Growth Rate
2006 – 88%
2007 – 57%
2008 – 20%
2008 Q1 – 14%
2008 Q2 – 2%
2009 Q3 – 3%
2008 Q4 – 0%
although I know you will find something wrong with this link as well, Here is one of the links.
http://www.mercurynews.com/ci_11399184?
Some math for you:
there is little argument that Google is a tech giant. innovative, doing well, hitting it’s numbers… a grand slam.
-google has about 20,000 employees (not contractors)
-they may revalue all employee stock options that are underwater
-that comes to 14,000 employees
-thus, only 6,000 (or 1/3rd) of Google employees have stock options worth ANYTHING. (they are almost all the employees with the longest tenure)
-Google has always been known for modest but decent salaries, and great perks (cafeteria, Segways, massages, and oh… stock options)
-they had at one time up to 10,000 contractors. They got good salaries, but no bennies.
-they are losing their jobs. Google admits as much
-what is not known, is the NUMBER of jobs lost.
analysis:
google employees can save noe valley real estate.
(ex SF-er raises eyebrow)
now on to Yahoo employees…
===
in the end, it’s all about income. Income supports RE.
Income was sky high in the late 1990’s as a bubble descended on SF specifically. That bubble is gone. there was a second bubble that was more general (credit bubble). That is now leaving as well.
where are the INCOMES going to come from??????
downsizing failing companies (Yahoo)?
downsizing winning companies (Google)?
staid old juggernauts (IBM)
newbies (Facebook? Flickr?)
I haven’t seen anybody post anything that would indicate that incomes in tech (the sum of the incomes of all the people in Tech in the Bay Area) will rise.
sure, some few individuals may have higher incomes, but it is coming at the expense of employees at other companies.
this is classic for a maturing industry of course.
Back in the dotbust, when people were still repeating the “property can’t go down” mantra, I would always say “you ever heard of a ghost-town”, and point across the water to Drawbridge.
http://en.wikipedia.org/wiki/Drawbridge,_California
Or if you want to see abandonment in a larger scale, take a trip to Russia:
http://www.abandoned.ru/
Not saying that the Bay Area is headed the same direction, or is even in the slightest comparable to wild-west ghost towns or post-communist Russia. All I am saying is that it does happen – time and again.
I personally am waiting for IBM to go under, and then I’m moving up the hill from my house to squat in their research facility in Santa Teresa park. Great place to defend from Zombie attacks too! :->
analysis:
google employees can save noe valley real estate.
That is your analysis, not anyone elses.
Google is growing very strongly in both revenue and profit. That cash is going to go somewhere, probably not to GOOG shareholders. Odds are that the Bay Area, as the HQ, will disproportionately benefit. Google is actually taking advantage of this downturn to try and pick up talent and convert contractor headcount to permanent staff. Why do you think they are doing that?
A similar argument can be made for Apple.
Google rumored to lay off 5% of engineering staff….
http://valleywag.gawker.com/5137337/google-engineers-fear-1000-or-more-layoffs
Google is actually taking advantage of this downturn to try and pick up talent and convert contractor headcount to permanent staff.
Do you just make this stuff up? Is the air really thinner in Noe Valley? Contracts are not being renewed, FTE headcount is stable and not growing – see the chart above.
I think noe valley jim does just make stuff up.
Did you see Apple’s latest quarter and forecast? Google’s?
Do you have a memory longer than 7 years? Remember 2001? Nothing was spared–no dotcom, no biotech, no big tech company (check out Cisco’s stock price Sun’s or Oracle’s during that time).
Bear markets end when EVERYTHING’s in the toilet. Just like last time. Google or Apple aren’t going to magically float everyone through the rough patch. They employ a few tens of thousands of people out of, what, a local labor force of 3 million?
Back in the dotbust, when people were still repeating the “property can’t go down” mantra
But property values actually did go down for about six months in 2001?
Google or Apple aren’t going to magically float everyone through the rough patch.
Has anyone claimed otherwise? I congratulate you in following the grand Socketsite tradition of beating the Straw Man to death.
Contracts are not being renewed, FTE headcount is stable and not growing – see the chart above.
We’ll see. I know a bunch of people that work there and they tell me that many of the 10000 contractors (this number itself is pretty speculative, btw) are being replaced with FTEs. We will know when they report Q1 numbers. I bet that their headcount goes up not down.
We will see then who is correct and who is “making things up.”
I pointed to Google’s own head count chart showing rapid deceleration in headcount growth and your disputing that? Go to Googles website – there’s 5 core FTE development positions in Mountain View; that’s right – 5! You need a better mole.
@David:
“But property values actually did go down for about six months in 2001?”
But not “my” property (said from the point of view of the people mumbling said mantra).
I am curious why some think this “tech” sector of the economy will be immune? I still also cannot understand why some feel the Bay Area will not experience this possible Depression? What is it about San Franciscans that makes them think they live outside the United States, or the planet for that matter? This recession is already GLOBAL, from London, NYC, Dubai, Asia, etc. Nobody is safe this time, those stroller moms on 24th street will start worrying about more than just whether or not “Whole Foods is coming”.
Who said immune?
“Who said immune?”
Many! First it was that the Bay Area had more wealth than other urban areas (this was a big discussion on Socketsite about a year ago). Then it was the rich foreign buyers who were all going to buy here because of our “culture” and because San Francisco was the “world’s favorite city” (Their words, not mine). Now it is Tech and Biotech that make us “different” from everywhere else. I’m just sayin that this reminds me very much of certain blog discussions going on regarding Manhattan real estate, and real estate in the Westside of Los Angeles. Everybody thinks their city and it’s pet industries are-WAS unique, and I think many San Franciscans are the last hold-outs in accepting reality.
Nobody said immune in this thread except for you anon94123, and you said it twice. Nice buzzword. You’re real curious about why others think tech is going to help out. Sure you are.
So I was kind of curious who said that San Francisco was the “world’s favorite city”, because I had not remembered anything like that. I don’t read every single post, so maybe one slipped by me.
http://www.google.com/search?hl=en&as_q=&as_epq=world%27s+favorite+city&as_oq=&as_eq=&num=10&lr=&as_filetype=&ft=i&as_sitesearch=www.socketsite.com&as_qdr=all&as_rights=&as_occt=any&cr=&as_nlo=&as_nhi=&safe=images
No one did.
Nobody? Maybe not on this thread, but NOT on this site. Even the editor has noticed this in the past.
https://socketsite.com/archives/2008/12/justquotes_another_immune_market_suddenly_catches_a_col.html
https://socketsite.com/archives/2008/07/supercities_are_immune_to_declines_at_least_until_theyr.html
I am curious, but my what interests me is San Francisco’s constantly self promoted belief that it is “different here” and “immune” from problems facing other areas.
Unemployment is up above 9%, Yahoo announces pay freezes, Obama is going after the bankers bonuses (frequently used to purchase housing) and mortgage interest rates are rising. Could it get any worse?
5 FTEs at google are going to make a dent in any of this?
9.3% Unemployment:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/01/23/BUEU15FUSA.DTL&tsp=1
Yahoo Freezes Salaries:
http://www.reuters.com/article/ousiv/idUSTRE50M42120090123
Obama going after bonuses:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aKEI_AHWycts&refer=home
Mortgage interest rates up:
http://investor.bankrate.com/releasedetail.cfm?releaseid=360637
It’s Different Here is Channel 2’s slogan.
“Immune” as flame is your slogan.
If you’re curiouis why don’t you re-read techdefender and Sunny Jim’s takes. But they did not say immune.
So I was kind of curious how often anyone on Socketsite had claimed that San Francisco was “immune” as well, and I searched through six pages of Google results before I could find one even remotely close.
In fact the phrase “not immune” is far more common that the word “immune” and 90% of the people who use the word immune use it in the way that the Editor did, to bash an argument that no one – no Socketsite poster at least – was making.
Now I am sure someone somewhere on the Internets said something stupid like that, but I am curious where you got the impression that it is (was?) a widespread belief.
NVJ:
Try searching for “different” and “unique.”
Don’t forget “special”.
“I know you all hate to keep hearing this, but it’s google. I’ll wager a third of the offers for the nice properties in Noe are from current/former google employees, many of whom still work. I have no way to check this, but maybe you do! Noe has very easy access to the peninsula (and to SOMA, for those who have moved on, but still work).
I think many posters here are not involved in tech, and are unaware just how much money has been created within the last four years”
From a posting on ….
Socketsite June 30 2008 “Coming Soon, A Noe Valley “Masterpiece in Progress”.
@anon2: Egad! I am being quoted out of context; please keep me out of this silliness!
Since you brought it up, my point (in June 08) was that many buy without strict regard to spreadsheets and income ratios, made easier by the fast money that was created in the google industrial complex (and cheap easy credit). Especially in Noe. I lived there for 7 years, and I know what I’m talking about!
In fact, I stand by the comment completely as quoted here, as of the date written.
Even taken out of context, the quote doesn’t claim Noe is immune to anything, and implies its relative strength flows from the tech wealth effect that occurred since summer 04. Hence my patented google indicator.
It was heartbreaking to see elaborate spreadsheets breathlessly “modeling” why housing should be cheaper in Noe, etc. But the models ignored important considerations (like all models do, as we’ve learned). I think I elaborated on this in other posts before I got tired of it…
Sentiment has clearly changed since June 08, and for good reason! As I’ve said before (since Oct 1), I can not believe anything closes now (unless you can afford to pay cash, and you fall in love with the place).
Sorry, I did not post your name as it was not meant to be a slam towards you, but instead about a house whose price was justified by some others because of wealthy tech buyers. I agree that for a period of time, tech wealth did boost housing prices, but as you have mentioned, “cheap easy credit” had a lot to do with this bubble as well.
If we still had the easy credit, but at the same time the Tech industry was down, don’t you think the housing price madness would have continued?
@anon2 — no worries, as I’m anonymous 😉 😉
Since everyone seems to have discovered the search function, try “google industrial complex” for more of my fascinating thoughts on the subject.
Or enjoy your weekend — your choice 🙂
… there’s 5 core FTE development positions in Mountain View; that’s right – 5!
Please tell me you don’t actually believe this.
“If we still had the easy credit, but at the same time the Tech industry was down, don’t you think the housing price madness would have continued?”
Great point. I think the tech industry gets more than its fair share of the blame for the housing bubble around here; sure the stock option windfalls (a relative rarity imo) and higher salaries contributed, but lets not forget who the major employers are in the Bay Area.
NVJ, Feel free to point to any data that corroborates your idea that GOOG is a converting large number CSG’s to FTE’s. You do know they hire CSG’s to do grunt work and so they can expand and contract the workforce quickly. Anyone who’s ever worked for a product development team at a software company would know that.
Do you actually believe that there are only 5 FTE programmer positions open at Google?
When you go to this page:
http://www.google.com/support/jobs/bin/topic.py?dep_id=1054&loc_id=1116&topic=1054
And see one link for the title “Software Engineer – Mountain View” you think that means there is only one opening?
I lived there for 7 years, and I know what I’m talking about!
Yeah, but didn’t you move to Montclair five years ago or something? Where you even living here post Google IPO?
Hi Jim: You worked at C* P* during the bubble right? Didn’t you get a windfall from that? You know more than anyone what I’m talking about — don’t be intellectually dishonest!
We looked in Noe (and other places) around IPO time, but it was already clear what was happening (of course, it hadn’t even begun). And for *what we wanted*, I didn’t think Noe’s premium was justified.
I’m not sure if you are disagreeing with my uncontroversial point (explosive tech options + cheap/loose credit drove prices), but I’m pretty sure I never said Noe was immune from anything, any more than I think a star is immune from running out of Hydrogen (or Helium, the state we are in now).
Best wishes — dub dub out!
Not quite sure what I am being intellectually dishonest about here, but yes, I sold some of my stock options in the first IPO I participated in. It didn’t make me rich or anything but was a big help, to be sure.
I still wouldn’t have been able to buy a place in Noe without the extra income of my wife though. She even kicked in half the down payment, which she had scraped together by working extra shifts at Yoshi’s while in grad school.
Noe’s premium today only really makes sense if you want to raise a family, though prices ware actually pretty reasonable in the 1999 time frame. During that period, Noe was cheaper than The Castro and much cheaper than Cole Valley.
I really don’t think that 1/3 of the homes being sold in Noe at any period were being bought by Google employees. It is possible, since no one has that info, but I do know all the people that bought on my block since the Google IPO and none of them work there. More than a few techies, to be sure, but none of them Googlers.