High-Tech Shake-Up Market Forces Fuel Volatility Of Important Economic Mainstay

In three years Egghead Software’s work force has shriveled from a 550-employee heavyweight into a leased office with 37 people working in Spokane.

In July, Key Tronic Corp. laid off 200 people and moved their jobs to Mexico.

A week after Key Tronic’s announcement, Itron Inc. trimmed 100 jobs.

Johnson Matthey Electronics has announced it will lay off 100 to 200 people within six weeks. Then again, maybe they won’t.

Intense market pressures, and the persistent drive to cut costs to keep companies competitive have played a part in each of those downsizing decisions.

While these have been individual corporate actions, they still have a cumulative effect on employment in Spokane, but area observers agree that there’s not much that can be done about it.

The electronics, computers and technology industries have always been volatile. Predicting how markets will shift is tricky at best.

For example, many personal computers have sold at around $2,000 and up for years, but for the last several months, there’s been a huge consumer shift to PCs costing $1,000 or less. While this shift has been expected by computer companies for years, predicting when it would happen was difficult.

Now that the shift is actually here, the consequences are felt by Johnson Matthey in Cheney. Workers there have been making thermal cooling components for high-end computer chips since the former Key Tronic plant reopened in November. But now that people aren’t buying as many expensive PCs, some Johnson Matthey workers could be laid off.

Although, as one Johnson Matthey official put it, the planned layoff in October might not be necessary if orders improve. Brent Bollong, general manager of Johnson Matthey’s Cheney facility, said that there could be a turnaround even during the 60-day, legally-required layoff notice.

That’s why the company didn’t specify an exact number of workers who will be laid off.

“Sixty days is a long time in this business,” Bollong said when the layoff notice was given. “Things could change. That’s why we can’t really say.”

Several Johnson Matthey workers shrugged off the layoff issue last week, as they went to their cars in a jammed parking lot. Production is running at full capacity, and employees say the pending layoff rarely is discussed.

“It’s kind of like agriculture,” said Sam Hale, a temporary worker for Johnson Matthey in Cheney. “There’s always the element of hot and cold.”

Although employees said anxiety always surrounds possible layoffs, some added they’ve grown to expect it.

“You’ve got to expect it in this industry, and you’ve got to be prepared for it,” said Melinda Rudd, a Johnson Matthey production worker from Medical Lake.

Key Tronic has faced similar pressures. Bowing to price pressures from competitors, the company moved more jobs to its Mexican plants to cut labor costs.

Egghead radically reinvented itself eight months ago into a company selling exclusively on the Internet, and just didn’t need the extra people, especially in retail stores.

So those who work in the high-technology sector in Spokane this summer received some painful reminders about the level of volatility and employment which is very sensitive to quick market swings.

“It’s like oil wells and diamond mines,” said Bernard Daines, president and CEO of Packet Engines, a growing computer networking company in the Spokane Valley. “There’s big risk and big reward, and the rewards keep people coming back.”

The risk-and-reward scenario has a variety of impacts on workers’ lives.

Sundara Ganesh, an application specific integrated circuit engineer at Packet Engines, said he wouldn’t purchase a home soon after landing a good technology job because it’s hard to know if that income will be there next month, much less years from now.

Although Ganesh said he feels confident in Packet Engines’ growth and innovation keeping it on edge, he’s lived here 18 months with no plans of selling his Bay Area home.

And as confident as Daines is in his company, he wouldn’t argue with that decision.

“If you pick one company and think it’s your nanny the rest of your life, you’re making a mistake,” Daines said.

Fickle as the electronics and technology industries can sometimes be, it’s apparent that when one door closes, others open.

A sampling of employment totals from eight major Spokane technology-based employers shows relatively little overall change. The group employed more than 4,200 people in mid-1996, and two years later, those same companies now employ at least 4,500.

That explains how major job losses at Key Tronic and Egghead have been counterbalanced by growth at Johnson Matthey, Software Spectrum and Packet Engines, among others.

The only pattern which emerges is that market forces have always driven the decisions, but now the markets are increasingly unpredictable. The May layoff of 650 Intel employees at a new plant south of Tacoma is just one example that Spokane is not alone in being victimized by volatility.

Hewlett Packard recently announced it would cut the pay of 2,000 managers worldwide by 5 percent for the next three months to help weather the Asian fiscal storm.

Just as often, though, layoffs are seen as a way to stay afloat anywhere.

“These are transitions that you see coast to coast, not just here,” said Mark Turner, president of the Spokane Area Economic Development Council. “But if it’s going to happen, now’s a good time, with unemployment being low, because there are other opportunities available.”

Ironically, that may be part of the problem. Engineering schools are seeing declining enrollments nationwide, creating a vacuum for highly skilled tech workers.

Whether some people avoid technology careers because of volatility is uncertain, but Daines said wellrounded technology workers should have no problem transporting their skills from company to company.

The ability to learn new skills quickly is what catches the eyes of technology companies now, he said. It’s also the best safeguard to remaining employable when the hatchet drops, he said.

“People have to increase their value by being hard-working, innovative and educated,” Daines said. “If they get in a rut and focus on something else, that can be a problem.”

Julie Prafke, owner of Humanix temporary services, said temp workers are given the same advice when entering the technology industry. Humanix tells its workers to do their best at learning skills on the job that they can apply anywhere if they have to, she said.

“They know they have more security with us than with some places,” Prafke said. “We have a lot of people that take that secure job, then a year later when they’re downsized, they’re back here.

She adds: “People need to realize that there’s no such thing as a 30-year tenure at a company anymore. You’re lucky to get 30 months.”

Graphic: Spokane’s high-tech employment