Slumping tech firms cut R&D spending

USA Today

SAN FRANCISCO — As the economic slump worsens, big-spending technology firms are starting to carve deep into meat and bone: their precious research-and-development budgets.

Traditionally, R&D spending on future products and technologies is a sacred cow even during tough times. Companies need those new products when the economy brightens.

But tech firms already have cut costs by laying off thousands of workers, freezing hiring and delaying raises and bonuses.

One of the few budget areas left is R&D.

"Obviously, you want to invest in the future," Morningstar analyst Jeremy Lopez says. "But growth has fallen off a cliff, and something's got to give — even R&D."

So far, tech firms are using scalpels to slice R&D:

• Intel, the world's top chip manufacturer, has trimmed its R&D costs this year to $4.2 billion from $4.3 billion. Analysts predict Intel will slash more deeply, but chief executive officer Craig Barrett has vowed there will be no further cutbacks.
• PMC-Sierra, a telecommunications-chip maker, warned analysts last week that it would cut $10 million in R&D projects and other business costs and lay off 230 of its 1,740 employees.
• Dell Computer told analysts it would cut R&D spending in the quarter ended Feb. 2. Dell declines to say how much of its $500 million budget this year will get slashed. But spokesman Matt Boucher notes that spending will rise for corporate computers, Dell's strongest products, as the market wanes for desktop computers.