Thursday, October 23, 2008

Memphis 'Barbarians'? VC weighs-in amid lay-offs in venture sector

Memphis-based Southeastern Asset Management (SAM) has upped its stake in Sun Microsystems to more than 21 percent (SEC filing), and seems poised to press management for cost reductions at Sun, according to reports in Bay Area papers. SAM Founder Mason Hawkins' recent presentation (filed with SEC) provides a fascinating glimpse into his thinking about the current market, the 7th Bear market in SAM's 33 years of operation. The WSJ blogged about it this morning. The news follows a stream of reports that venture-backed companies are opting to cut costs quickly, before things get worse, reflecting a mindset similar to that which we reported at Nashville-based Cybera, which says it's tightening resource allocation to strategic priorities. With big brands like Yahoo! and eBay having announced about 4,000 job cuts this year between them, and others following, the climate has become conducive to cost-cutting. Says one Valley columnist, "Venture capitalists, including Silicon Valley stalwarts Sequoia Capital and Benchmark Capital, have issued ominous warnings to their portfolio companies about the tough times ahead, coupled with advice to reduce spending." In September, the nation reportedly experienced its worst rash of mass layoffs since September 2001, with 2,269 such events last month. Each one involves at least 50 workers laid-off for at least 30 days. Here in Tennessee, the Memphis Business Journal reports there were a total 29 mass layoffs announced in Tennessee during August and September.

No comments: