When Sacking 4000 People Achieved Nothing.

What balance sheets don’t show is potential. In all companies, except very sick ones, there’s the potential for growth. Usually this resides in the brains of a few key employees.

NXP's Q2 accounts it says it has spent $715 million on sacking people since September 2008.

 

Of course it doesn't call it sacking people - NXP calls it a 're-design programme'.

 

So what has sacking some 4,500 people achieved?

 

Well the quarter the sackings started - Q3 2008 - the company made $147 million EBITDA profit on sales of $1.3 billion.

 

Last quarter the company made a net profit of $84 million on sales of $1.2 billion.

 

In other words it paid out $715 million for nothing, while a lot of people and their families were negatively impacted.

 

And judging by NXP's lack of growth over the period, the people who had the brains to deliver growth were the ones who got sacked.

Comments

14 comments

  1. The source was TechCrunch, Mark, at http://techcrunch.com/2011/07/26/androids-dirty-secret-shipping-numbers-are-strong-but-returns-are-30-40/ quoting ‘someone familiar with . . . ‘ so the short answer is: ‘Not very’. And that’s compounded by the fact that it’s August, there’s not much going on, there are major battles on at Apple-Samsung-Android and that’s all grist for the rumour mill. The only solid fact about it is is that Samsung, without giving any coherent reason, stopped its previous practice of releasing phone sales figures.

  2. If the return rate on Android handsets really is 30% to 40% then Android handset manufacturers would be making massive losses. With 550,000 new Android devices registered each day then that would be about 200,000 returns a day, at $100 per device than would be $20M per day or more than $7B per year.
    Are you sure you have a reliable source?

  3. Employees are a company’s biggest asset if the employer knows how to get the best out of them, Chris, but if the employer doesn’t know how to do that, then employees become an asset of diminishing value.

  4. Employees are a company’s biggest asset. Bill Hewlett and David Packard knew this. Accountants are too money focussed to see past the bottom line.

  5. Thanks Terry, that’s interesting and appropriate – ASML was a spin-off from Philips originally. What goes around comes around.

  6. Many of the key technical people from the former Philips Semiconductors centre in Eindhoven have ended up in ASML.

  7. Accountants do not make good MDs
    too concerned with numbers to manage a business

  8. Wow, Anon, I’d love to be a fly on the wall at the next software strategy meeting. As to the Android software stack I gather it’s causing some problems – rumours are that consumers are finding it unfamiliar after iOS and Blackberry OS and are returning Android phones at a rate of 30-40%. Better tell your software manager not to pull his punches!

  9. Martijn, Judging by the marked contrast between Infineon – which keeps increasing its growth forecast (now 20%+), and NXP, which has had no growth for several years and looks like being flat again this year, the people with the brains who walked out went off to work for Infineon.

  10. usually the people with the brains to deliver growth leave by themselves when they see this coming, they don’t wait to get sacked.

  11. Management by numbers, management by metrics. They have some use but there’s a strong tendency for executives to use them as a replacement for actually understanding the business. I have just had a discussion with one of our software managers who is utterly frustrated at the inability of our executives to understand some relative simple software issues. My final recommendation was to go to physical violence in the next software strategy meeting on the basis that if they could flog Latin and Classical Greek into me at school then perhaps it might help our executives get to grips with the Android stack.

  12. When the CEO is an accountant and the owner is a private equity company, Mr C, you can expect management by numbers.

  13. I see that the CEO started out in life as an accountant, he is also part-time.
    Oh when will they learn?
    Quote:
    “Mr. Clemmer worked for Texas Instruments Incorporated as senior vice president and semiconductor group chief financial officer.
    Mr. Clemmer also serves on the boards of NCR Corporation and Trident Microsystems, Inc.”

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