By Douglas A. McIntyre
Layoffs at big companies are so common now that it is novel when a day goes by without Microsoft, Caterpillar, or Macy’s letting thousands of people go. There are a relatively small number of America’s largest companies which will almost certainly not have significant layoffs. One of them might close an office in Turkey, another could replace telephone operators with an automated system, but each is in a unique position that makes it highly unlikely for them to want or need to fire employees.
Some of the companies on the list are simply doing so well that they cannot afford to do without all the people that they have. Not only will these companies be unlikely to fire people but some may actually be hiring. The other firms included have large amounts of cash on their balance sheets and have elected to use the slow economy to develop new products and services to take share away from financially weaker competitors. A few of the companies on this list had modest job cuts last year. None of them were significant and are highly unlikely to happen again.
Cisco cut 3,000 of its 66,000 people last year. CEO John Chambers has said that the company plans to avoid job cuts. Cisco probably has as much or more cash on hand as any tech company in the US, holding $27 billion in available funds. The company is in the midst of a very rapid expansion into the server and data center business. That will require extra personnel and may involve acquisitions. Cisco is in several businesses which are nearly recession-proof and should continue to do well. Its core router operation is critical to building out broadband and systems for popular products like VoIP. The new stimulus package should give that business a bump up. Cisco is also in several sectors like video conferencing which may actually grow as business people cut back on travel.
Visa is lucky. It does not offer consumers credit. It acts as an agent to transfer funds between buyers and merchants. Visa also handles transaction clearing and settlement services. Unlike large banks, when a customer defaults, Visa’s balance sheet is not at risk. The company’s role as an intermediary makes it an attractive investment. Over the last month the DJIA average was down slightly while Visa shares were up 32%. In the last quarter, Visa’s profits rose 35%. Loaning money is a bad business. Handling the transaction between borrower and lender for a fee is a good one.
Apple will not lay people off because Steve Jobs would have to admit he had made a bad decision and that the company would not be appear to be perfect. This is, of course, only part of reason jobs at Apple are safe. The company has $24 billion in cash and securities and adds to that every quarter. Apple refuses to make acquisitions, preferring to create and market its own products. M&A deals often mean personnel cuts. Because Apple’s success is based on creating new products, improving old ones and aggressive marketing, it will need all the people who work at the company and perhaps more. Apple is one of the few companies in the US prepared to drive product introductions and spend to pick up market share as the recession deepens. Apple believes that it makes the best consumer electronics and PCs in the world and it is not going to let anything get in the way of expanding those franchises.
Apollo is a large education company almost no one has heard of. The firm has a stock market value of $12 billion and had sales of $970 million last quarter. Its operating profit on that was $307 million, so the company has obscene margins. In the last year, Apollo’s shares were up almost 30%. While Apollo may not be well-known, it largest division, the University of Phoenix, is well known because it is the largest private university in the country. As people find that they need new skills to find work, Apollo is in a position to take advantage of a drop in the economy and rise in unemployment.
Altria is doing well because people addicted to cigarettes smoke even during a recession. The company said it expects EPS growth of as much as 6% this year. Altria recently bought another tobacco company,UST and the company has set layoffs because of the acquisition. However, Wall St believes that “sin stocks” tend to dodge downturns well. In the last quarter, the company made $1.1 billion on $4.7 billion in sales. Altria has almost $8 billion in cash and a business which is, compared to most, smokin’.
Google fired a very small number of people last year. If the company wants to control personnel costs, it can simply stop hiring. Google has been adding employees at a dizzying rate for four years. Google, like Apple, has a tremendous interest in keeping its R&D, marketing, product development, and engineering projects going forward as rivals like Microsoft (MSFT) and Yahoo! falter. Google has a chance to pick up market share from both companies and improve its competitive position against Microsoft in the PC application business. It can significantly improve its edge by putting money into initiatives while its rivals are cautious or under-funded. The world’s largest search company has $14 billion in cash and no debt. It is adding to that cash base at the rate of about $1.5 billion a quarter.
Colgate has “side-stepped the global slowdown” as MarketWatch recently wrote. In the most recent quarter the company’s profits were up 20%. It would be hard to pick a better time to sell toothpaste, pet food, and shampoo. Even in a bad economy, most of these are products will have stable sales.
Verizon is not growing as fast as it was a year ago. Cellular sales are not quite as good due to market saturation and the economy. But, the use of wireless devices for sending items like data and video over wireless networks is improving margins in the company’s cellular operations. Verizon has also made a major gamble that it can take home broadband and television services away from the cable companies. It will need to continue to market, service, and build the infrastructure out for that to get a return on its multi-billion capital investment. Verizon removed a very small number of people who serviced its Circuit City locations when the retailer folded. The one business that Verizon has been struggling with is its wireline to the home business—the traditional phone. The company has already cut 2,700 people to keep costs in that operation down. Its plan to market inexpensive home service should help attrition in that part of its business and help to preserve jobs.
Amgen is still growing rapidly unlike most Big Pharma companies. Its biotech business is producing novel medical treatments that have kept Amgen’s sales solid while old line drug companies have been shrinking. In the fourth quarter, Amgen spent $770 million on R&D and needs to do so to both further refine and develop new drugs. The firm is not cutting back on the essentials for keeping its product mix strong simply because the economy is weak. Amgen expects to bring in $15 billion in revenue this year, about flat with 2008. Amgen has several products in trials and some show enough promise to help push new product revenue up significantly over the next two or three years. Amgen has almost $10 billion in cash and every reason to push for market share while large drug companies are on the ropes.
Corinthian College shares are up well over 100% this year. It is another highly successful company in the education field which should benefit from the need of people out of work to develop new skills. In the most recent quarter, the company’s profits rose 86% and it increased its forecast for the current year. The firm’s CEO recently said “Although difficult to quantify, current trends indicate that the recession has helped increase marketing leads and student enrollment.” It sounds like Corinthian may be hiring. On-line education is definitely in the boom phase of expansion.