Business Tech

Thousands of businesses were left without access to their applications Tuesday after Salesforce.com's servers suffered a service disruption.

The problem affected all of the software-as-a-service vendor's data centers for at least 40 minutes.

According to a Salesforce.com status page, the problem occurred at 12:40 p.m. PST Tuesday when a core network device failed, stopping all data from being processed in Japan, Europe, and North America.

When the system failed to trigger a failover to redundant systems, Salesforce.com staff had to carry out a manual recovery.

Most of the services were restored in about 40 minutes, according to Salesforce.com, and all services were back online about two and a half hours later.

"While we are confident the root cause has been addressed by the work-around," the company said, "the Salesforce.com technology team will continue to work with hardware vendors to fully detail the root cause and identify if further patching or fixes will be needed."

Freeform Dynamics senior analyst Tony Lock said that "having a service interruption like this one is certainly noticeable when you have a vendor like Salesforce.com that has been delivering pretty good service over the course of the last five or six years."

Lock added that as long as software-as-a-service vendors continue to deliver good service levels and availability, the occasional interruption is acceptable since "nobody expects IT to be perfect."

"It will not have a major impact on organizations' plans for the adoption of software as a service. I think that software as a service will continue to grow as it has been doing over the course of the last few years," he said.

Tim Ferguson of Silicon.com reported from London.

Dell announced Thursday that it is closing its manufacturing operation in Limerick, Ireland, and shifting production to its Polish plant and to third-party contractors.

Assembling a desktop PC at Dell's Limerick plant.

(Credit: Dell)

The move will result in the loss of 1,900 jobs in a facility that employs 3,000 people.

Employees and unions in Ireland have long been expecting the decision, which is part of a $3 billion restructuring that Dell announced last year. In September the company said it wanted to shed 24,600 jobs around the world.

Dell said in a statement that the first Limerick employees would leave the company in April and the whole process of switching production will be completed by January 2010. Workers will receive a competitive severance package and career outplacement assistance from the company, the company added.

The PC maker has had a facility in Ireland for 18 years, where it has become a major force in manufacturing and the largest employer in the Limerick area. Commenting on the move Sean Corkery, vice president of operations, Dell Europe Middle East and Africa said: "This is a difficult decision, but the right one for Dell to become even more competitive, and deliver greater value to customers in the region."

According to Dell, the company's remaining employees in Ireland "will continue to co-ordinate EMEA manufacturing, logistics and supply-chain activities across a range of functions including product development, engineering, procurement and logistics." Dell will keep its Global Innovation Solutions Center and European Command Center in Limerick.

In late December, the company reorganized its management structure as it reacts to changing customer requirements. In March 2008, Dell closed a home state plant in Austin, Texas, as part of its plans to cut at least 8,800 jobs.

Colin Barker of ZDNet UK reported from London.

Chinese PC maker Lenovo confirmed Thursday that it is carrying out a restructuring, which involves the company letting go of 2,500 employees--about 11 percent of its workforce.

With the changes, the company is targeting to save $300 million annually, according to a Singapore-based company spokesperson.

The announcement comes after a report surfaced earlier this week, saying that the PC maker would lay off 200 employees in its Beijing-based headquarters, including around 10 senior management staff. In response to queries from ZDNet Asia, Lenovo had dismissed the report as rumors.

At its U.S. Web site, Lenovo said the job cuts will be made globally during the first quarter of 2009. The axe will fall not only on management and executive positions, but also "in support and staff functions such as finance, human resources, and marketing."

Under the restructuring, Lenovo is consolidating its Greater China and Asia-Pacific operations--previously run as separate business units--and Russia into one. The new Asia-Pacific and Russia (APR) unit will be headed by Chen Shaopeng, who up until now was senior vice president and president for Greater China. Japan, Australia and New Zealand (ANZ) are separate from this new unit.

Among those affected by the move is David Miller, Lenovo's senior vice president and president for Asia-Pacific. The Singapore-based company spokesperson said Miller would remain with Lenovo for a "transition period" but declined to give a more specific time frame.

According to the spokesperson, cost reductions will occur in "nearly every business unit," and headquarter functions as well as duplicate functions in the new APR unit will be eliminated. "Quite a few of the Asia-Pacific functions housed in Singapore will now be housed in Beijing," she noted in a phone interview.

Lenovo's reorganization has planted three of the four BRIC (Brazil, Russia, India and China) countries, or emerging markets, in one single region while leaving out more mature markets such as Japan and ANZ, an analyst noted in a phone interview with ZDNet Asia Thursday.

"They've got the 'RIC' countries now," said Bryan Ma, IDC's director for personal systems research in the Asia-Pacific region. "Clearly they're looking toward this region as a big growth market."

Apart from streamlining, which is "good" in the current economic environment, the changes will "hopefully help to make the company a bit faster in addressing opportunities in the market," said Ma. One of the long-time concerns about Lenovo, he explained, has been that it seems "a bit slow" to respond to some market trends, especially in the consumer space.

Whether Lenovo's actions will bear fruit, may not be known until next year as 2009 will be challenging and "economically tough for any PC vendor", Ma added.

Vivian Yeo of ZDNet Asia reported from Singapore.

LAS VEGAS--Before making the new inexpensive mini camcorder it unveiled at CES Wednesday, Sony tried to purchase the category leader, Pure Digital.

Sony Electronics President Stan Glasgow on Wednesday told CNET News that the vastly popular Flip Video camera made by Pure Digital came onto Sony's radar almost two years ago. Glasgow said he knew he wanted Sony to have a product in the category and talked to San Francisco-based Pure Digital about a possible acquisition six months ago.

Without saying how much Pure Digital was asking, Glasgow said it was much more than Sony wanted to pay. The two companies discussed several possible business scenarios, but none worked out.

And even before that, though the U.S. division of Sony really wanted an inexpensive mini camcorder for the U.S. market, the company's Japanese engineers didn't really see the utility of the product category.

Since neither scenario worked out, Sony, a leader in higher-end camera equipment, finally came out its own version of Pure Digital's Flip Mino camera, which uploads video directly to the Web via a USB port.

The Webbie does 1080p MPEG-4 video and shoots in 5 megapixels. The camera will be available in March for about $170.

The XO laptop.

(Credit: OLPC)

The One Laptop Per Child project announced Wednesday that it is slashing its workforce by 50 percent, reducing salaries for the remaining staff, and restructuring its operations.

Nicholas Negroponte, founder of the group that aims to provide low-cost laptops to children in developing countries, announced the cuts in a company blog post:

Like many other nonprofits that are facing tough economic times, One Laptop per Child must downsize in order to keep costs in line with fewer financial resources. Today we are reducing our team by approximately 50% and there will be salary reductions for the remaining 32 people. While we are saddened by this development, we remain firmly committed to our mission of getting laptops to children in developing countries. We thank team members who are departing for their contributions to this important mission.

Restructuring brings with it pain for some of our friends and colleagues who are being let go. These are people who have dedicated themselves to the advancement of a noble cause, and to say that we are exceeding grateful for the time, the ideas, the energy and the commitment they have given OLPC does not -- cannot -- adequately express our admiration or our gratitude. The fact that there are 500,000 children around the world who have laptops is testament to their extraordinary work and is already a key part of OLPC's legacy.

Negroponte wrote that the company will focus on development of its second-generation device, but will hand-off development of the Sugar operating system to the open source community.

The project recently revived its two-for-one deal on its low-cost laptop. Amazon.com was tapped to handle its Give One, Get One program, launched initially in 2007. Through the program, anyone can pay for two XO laptops; one is shipped to the buyer, and the other is sent to a school kid in a developing nation.

The device comes loaded with both Windows XP and the Linux-based Sugar operating system created for the XO. The inclusion of XP stemmed from concerns that developing nations that wouldn't buy the laptops for its classrooms without the world's dominant OS on it.

However, the Cambridge, Mass.-based group has faced its share of challenges in the three years since it was formed. Its XO laptops initially cost $188 each instead of the anticipated $100, some countries are scaling back their deployment plans. Intel, which was briefly part of the project, quit in January 2008, claiming OLPC was pressuring it not to compete with its own laptops.

Storage giant EMC on Wednesday announced plans to cut 2,400 positions from its workforce, despite expectations of posting record fourth-quarter revenues.

The job cuts will represent 7 percent of the company's workforce, as part of a restructuring program that will also include consolidation of facilities and back office functions, and a rebalancing of products and markets.

EMC expects to cut $350 million in costs this year and as much as $500 million next year.

The cost cuts come as the company issued its preliminary fourth quarter forecast, in which it noted it expects to generate approximately $4 billion in revenues--a 4 percent increase over the same period a year ago. The company expects to generate net income of 23 to 24 cents a share, excluding restructuring charges. Those figures are in line with the company's previous forecast.

"We managed our costs and investments very carefully throughout 2008," Joe Tucci, EMC chief executive, said in a statement. "However, we believe this additional program will help us strike the right balance between achieving higher levels of efficiency and sustaining strong business agility and performance."

India's traditional outsourcing centers appear to be falling out of favor.

According to Pierre Audoin Consultants, outsourcing companies are increasingly looking outside Bangalore and Mumbai when choosing bases in which to set up shop.

PAC found that while India remains popular with the top 50 outsourcing companies--11 of the 49 new offshoring delivery centers set up in 2008 were based in the country--vendors are progressively creating more bases in cities such as Chennai, Noida, Hyderabad, and Pune.

According to Nick Mayes, a senior consultant at PAC, conditions for outsourcers in Bangalore and Mumbai are no longer as favorable as they once were.

"Over the last two or three years, labor markets, particularly in Bangalore and Mumbai, have become overheated. The big IT services companies and multinational companies have been competing very intensely for the best resources coming out of the universities and also resources from their rival organizations," he told Silicon.com.

Big Indian outsourcers TCS and Wipro have been first to turn to the second tier, establishing links with the universities and inspiring a shift toward cities like Chennai and Pune.

The consultants also found a trend among outsourcers to spread outsourcing sites over a number of countries.

"(Outsourcers) are spreading not just the risk but also being wary of being overdependent on single-market terms of salary inflation in that country or the political environment in that country," Mayes noted.

Over 2008, PAC found that 10 new outsourcing centers were opened in Latin America and another six in China, while Mayes believes Malaysia and the Philippines will also increasingly prove to be attractive outsourcing destinations.

While similarities in business culture and language will keep India at the top of the United Kingdom's list of outsourcing hot spots, Eastern Europe and Russia could be set to emerge as an alternative.

"There's some fantastic technical skills coming out of the former Soviet Union--guys with 20 or 30 years' experience of programming for military organizations and things like that," Mayes said.

"Slowly but surely," he said, "companies are starting to get the supplier marketplace in place to be able to support Western clients--previously, it was 10 or 20 man outfits out there, but we're starting to see some sizeable companies build up, and that's what Western clients want to work with. They want the security of knowing the company they're working with will be around in 12 months time so they can commit to serious business with them."

Jo Best of Silicon.com reported from London.

Intel's fourth-quarter warning is not only bad news but bad timing. With the Consumer Electronics Show kicking off Thursday adorned by all those bright, shiny gadgets, Intel effectively said: gadgets maybe, but not so bright and shiny.

And for an Intel warning, this one was particularly dire. The biggest chip bellwether said it now expects only $8.2 billion in revenue for the quarter, a 23 percent drop from the year-earlier period, and 20 percent from the third quarter. And this comes after issuing a warning on November 12.

So what's happening? The clearest example of the gloom that has descended on the chip industry, and by extension computer and gadget makers, came relatively early from another chip bellwether, Taiwan Semiconductor Manufacturing Company -- the largest chip contract manufacturer, which supplies chips to all the first-tier electronics and computer makers. Back on October 30, TSMC issued a forecast that set the tone for the rest of the industry: CEO Rick Tsai said the supply chain -- the myriad of companies that order chips from TSMC -- was "reducing inventory very aggressively."

That supply chain, either directly or indirectly, is the computer and gadget makers of the world.

So going into CES, the picture is not pretty. "We just heard consumer electronics sales over the holidays were down 26 percent year to year," said Broadpoint AmTech analyst Doug Freedman. "You want to head into CES with a pall over it? There it is, right there."

And go the other way, up the supply chain -- the chip gear makers who supply production equipment to chip companies -- and things are even more bleak, with some gear makers saying they don't expect any orders at all in 2009 for certain categories of equipment. In December, Netherlands-based ASML CEO Eric Meurice said that "never before have we witnessed such a sharp and sudden fall-off in lithography system demand."

Other examples are almost too numerous to list: for starters, Toshiba and SanDisk slashing flash memory output 30 percent, Taiwan's memory chip industry on the verge of collapse, and Micron Technology posting a massive $706 million loss.

Yes, there's probably a silver lining in all of this, in that chipmakers and gadget suppliers have to cut the fat and become lean and mean, but where does it end?

And how will this downturn transform the computer industry? Looking at it through the prism of Netbooks -- which are expected to catch much of the limelight at CES -- may provide some insight. These cheap laptop computers are on fire, partially because they are compelling designs but mostly because of price. Good thing? Yeah, great for consumers and small businesses that are finally realizing they don't have to pay $2,000 for a small, lightweight ultraportable notebook. Or simply can't afford a $1,000 notebook.

But not so great for Intel, Apple, and others. "What is the most expensive laptop out there? The Apple (MacBook) Air," said Freedman. "That's a $1,500 or $2,000 machine. Now all of a sudden I'm giving you ultraportability for $500," he said, referring to the price of a Netbook.

In this sense, over-priced notebooks could be seen as roughly equivalent to large SUVs -- overkill. Just as General Motors must wean itself off lumbering SUVs, so may Intel, Hewlett-Packard, Sony, Toshiba, et al., be forced, to some extent, to wean themselves off high-profit notebook computers. After all, what took Sony so long to bring out a Netbook? And why don't we see an Apple Netbook? It's not a stretch to say that those companies don't like the idea of selling a lot of inexpensive computers.

At CES, companies will be hawking flashy gadgets, as always, and maybe attendees can suspend disbelief for a few days blinded by the glare of the gadgets. But that's really just lipstick on a pig.

With the overall economy slumping, the tech industry is taking its fair share of hits. We'll keep updating the chart below as news of company changes comes in. See our complete coverage of how the tech sector is faring here: Tracking the tech downturn.

Know of a layoff not listed here? Let us know on this form or e-mail us.

See also: The spreadsheet of sunshine: Who's hiring.

This post was updated at 11:16 a.m. PST with comments from a Friedman, Billings, Ramsey & Co. analyst.

Intel warned Wednesday that its fourth-quarter revenue will fall $2 billion short of its original forecast, due to PC makers curtailing chip orders.

The announcement comes less than two months after Intel warned on November 12 that its fourth-quarter performance would fall below its original forecast.

Revenue is now expected to be about $8.2 billion, down 23 percent over the same quarter in the previous year and down 20 percent sequentially.

On November 12, Intel said it expected revenue to be between $8.7 billion and $9.3 billion. Before that, Intel had expected to generate $10.1 billion to $10.9 billion in revenue for the quarter.

The drop in revenue is a result of PC makers slicing orders and living off their existing inventory of chips, Intel said.

Intel also noted it expects to report a greater loss in its equity investment, interest, and "other" category of between $1.1 billion and $1.2 billion, versus its previous expectation of a loss of about $50 million.

The chipmaker's investment in Clearwire, for example, is expected to result in a noncash charge of about $950 million in the fourth quarter.

Intel's gross margin is now expected to fall toward the "bottom of the previous expectation of 55 percent, plus or minus a couple of points," the company said.

Research and development spending, as well as general and administrative costs, are anticipated to be $2.6 billion, lower than Intel's previous forecast of $2.8 billion.

Intel, although the largest, is by no means the only chipmaker to issue a fourth-quarter warning.

Last month, Texas Instruments and Broadcom both warned that their quarterly performance will fall short of previous forecasts. Intel archrival Advanced Micro Devices also announced that its fourth-quarter results will fall below previous expectations.

Intel shares fell as low as 6.7 percent to $14.34 in early morning trading. The company is set to report fourth-quarter earnings on January 15.

While Wall Street may have been surprised by Intel's second warning for the quarter, one analyst noted it was not a "complete shock."

Glen Yeung, an analyst with Citi Investment Research, noted in an analyst report:

We had been anticipating a shortfall, modeling 4Q08 down 17 percent below even the low end of Intel's guidance, and in this regard are not completely shocked by Intel's pre-announcement.

Recent data points from notebook original design manufacturers (ODMs) and motherboard makers have been noticeably negative, substantiating such a shortfall. The miss, however, comes after Intel had established its earnings date, and may destroy any false hope that may have arisen on the premise that the earnings date signaled they had made the quarter.

Yeung noted that Intel's November warning of a sequential revenue drop of 12 percent would have already marked its worst fourth quarter sequential decline in history. And with this latest announcement, the historic gap gets even wider.

And for Yeung, it's the revenue decline that causes more concern than a drop in gross margins. He notes that the drop is still within Intel's previously issued forecast.

Barclays Capital analyst Tim Luke, meanwhile, believes weakness in desktop computers and servers is mainly driving the revenue shortfall.

He advised investors to keep a keen ear tuned to any comments Intel may make about its assessment of system-level and finished-goods inventory when it reports its fourth quarter results next week. Luke noted that he believes inventory in the distribution channel remains moderate, while inventory on hand at its customers is likely up.

Investors may also want to take heed of comments Intel may make about its future revenue guidance, visibility into the quarter, whether future gross margins may dip lower than the expected 53 percent range, and the degree that Intel may reduce its capital expense, said Craig Berger, an analyst with Friedman, Billings, Ramsey & Co.

The rate that computer makers are shipping systems in the fourth quarter is expected to fall 3 percent sequentially for notebooks and 27 percent for desktops, Berger noted.

And in the first quarter, Berger is expecting notebook shipments to decline 23 percent sequentially and desktops by 18 percent quarter over quarter. Overall, that could result in a 21 percent sequential decline, which would mark the worst seasonal decline in the chipmaker's history, he added.

Berger noted that given the steep drop in revenue, Intel could announce a cut in its workforce during its earnings call next week.