It would seem that the spate of job-cut announcements like the ones made by eToys Inc. and other Los Angeles-based dot-coms in the last several months would create a glut of tech talent in the L.A. market. It ain’t so.
Yes, the layoff tally in the tech sector is growing rapidly here and across the nation, as more and more businesses ax jobs in an effort to protect the bottom line. But at the same time, you can almost hear a giant sucking sound as the free agents get absorbed by other companies.
“It’s still a candidate-driven market,” said Steve Finnick, vice president of operations for the recruiting firm DNA Search Inc. “There are plenty of jobs out there. Software and hardware engineers who lose their jobs will have multiple offers.”
Most headhunters don’t anticipate that the supply will exceed demand in 2001.
“In the last two or three months, there was a shot of supply into the L.A. market, but it was no more than a hiccup,” said Paul Ratajczak, vice president of operations for the L.A. recruiting firm Kforce.com. “There’s still more demand than supply, and it’s still very tough to find outstanding tech talent. I don’t see that changing.”
Estimates vary on how many dot-com jobs have been cut in L.A. since the downturn. One estimate puts the number of local cuts between 3,000 and 4,000 since spring 2000.
Doubtless, the number of layoffs here is increasing, mirroring the national trend.
Nationwide, Internet firms dumped 10,459 jobs in December, 19 percent more than November’s record total of 8,789, according to Challenger, Gray & Christmas Inc., an international outplacement firm that tracks job cuts.
The numbers are expected to climb higher in 2001, as businesses see labor cuts as a way to address continuing pressure to speed their quest to profitability.
Consider the number of announcements made in the first half of 2000 vs. those made in the second half of 2000: from January through June, dot-com job-cut announcements totaled 5,097. Between July and December, 36,177 cuts were announced, a 600 percent jump, according to Challenger, Gray & Christmas.
So how can it be no more than a hiccup?
“The genius of L.A. that doesn’t get recognized is that it’s a huge market,” said Jack Kyser, chief economist with the L.A. County Economic Development Corp. “If you lose a job here, this is the best place to find another job. If you have tech skills, the market is still very welcoming.”
Kyser points to the proliferation of tech companies along the Ventura (101) Freeway corridor, where techies are currently in huge demand.
Ratajczak said anyone with a background in Oracle databases has their pick of jobs in L.A., because companies here are increasingly concentrating on data warehousing. Web developers are also on Ratajczak’s most wanted list.
Still, the rise in the number of free agents in L.A. is undeniable, and some tech companies have responded by bypassing search firms and recruiting on their own.
“Companies are logically trying to interview before they have to go straight to a search firm,” Ratajczak said.
On a more optimistic note for headhunters, the layoffs have helped them to build better relationships with traditional companies, because the new breed of candidate is looking for stability, rather than the promise of fast wealth once offered by startups.
“The shakeout slapped the candidate side of the market with a dose of reality that was healthy,” Ratajczak said. “After they saw all their paper equity turn into vapor equity, they started looking for more security, and they’re finding it at more traditional, well-established companies.”
Courting Fashion
The unsolicited bidding war for New York City-based fashion portal Fashionmall.com Inc. in late December shows how some L.A.-based bargain hunters are moving aggressively to acquire Internet companies.
Encino-based Sitestar Corp., an Internet holding company, kicked off the bidding in October when it offered $3 per share or $22.5 million for Fashionmall’s 7.5 million shares.
Fashionmall attracted attention last year when it purchased the ailing Boo.com and successfully relaunched the site. The Fashionmall site directs clothing shoppers to an array of vendors.
In late December, Beverly Hills-based mergers and acquisitions company Narax Inc. offered Fashionmall $3.50 a share or about $26.25 million.
That offer was topped on Dec. 28 by an offer of $7 per share in cash and stock about $52.5 million from Van Nuys-based GenesisIntermedia.com Inc.
The stock price of Fashionmall, which went public in May 1999, has been hovering in the $3 range, and although the company has yet to post a profit, it still looks sweet to buyers because of its cash in the bank: some $35 million.
Fashionmall’s stock jumped with each successive offer, closing up 28 cents, at $2.44, after Sitestar’s offer; closing at $2.59, up 59 cents, after Narax’s offer; and closing at $4.18, up 62 percent, after GenesisIntermedia’s offer.
Sitestar has since withdrawn its offer for Fashionmall, saying in a press release earlier this month that it will not compete with the other offers the company has received.
As of Jan. 10, Fashionmall CEO Ben Narasin said the company was in the process of evaluating the offer from GenesisIntermedia.
Narasin, who owns 47 percent of Fashionmall, said he is “skeptical” about Narax and the offer from its president, Michael Savage. Narasin said that he was not able to find any information about Narax and that requests for background from Savage were ignored.
Furthermore, Fashionmall is “not seeking to sell itself,” Narasin said. In fact, Narasin emphasized that his interest primarily lies in undertaking some acquiring of his own.
“We are very interested buyers of companies’ assets,” he said. “The Internet correction provided opportunities for cool heads with capital reserves.”
Indeed, GenesisIntermedia has been buying shares of Fashionmall on the open market since November and now owns 7 percent of the portal, according to GenesisIntermedia director of investor relations Robert Bleckman.
“Our interest has to do with the synergy Fashionmall has with Centerlinq,” Bleckman said.
Centerlinq is GenesisIntermedia’s network of public access Internet kiosks, which are located in malls in various metropolitan areas, including Santa Monica Place.
With Centerlinq, shoppers can register at the kiosks to enroll in a rewards program in which purchases earn gifts and discounts on merchandise sold at the mall. The registration information then becomes a database for the mall operator and tenants, as well as for GenesisIntermedia, which can use the information to run direct marketing programs.
Staff reporter Hans Ibold can be reached at [email protected].
