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5 of 2016’s Ugliest Big-Tech Layoffs

Creative destruction is taking a human toll in some tech companies

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There’s a phrase that many innovators and entrepreneurs love: creative destruction. The idea behind the phrase is exactly what it sounds like, with new ideas coming in to take apart the old order and fashion something different.

tech stocks

For the global economy, creative destruction is undoubtedly a good thing. Some classic examples are that the advent of electric refrigeration rendered ice delivery obsolete and that the growth of the automobile forced many buggy whip makers to go bankrupt.

But as much as we love our fridges and cars, it’s important to at least acknowledge the human element of creative destruction. The ice men cometh no more, and either had to learn a new trade or suffer financial hardship.

This issue is very relevant in 2016, as both presidential candidates frequently discuss the impact of globalization, trade and automation on U.S. manufacturing.

However, rust-belt manufacturers in the Midwest aren’t the only victims of innovation and so-called “creative destruction.” Some relatively young tech companies have been put on their heels by the move to mobile and the post-PC age, and many are struggling to find their way — and laying off thousands of workers as a result.

In fact, 2016 has been one of the worst years in memory for tech layoffs. Here are five of the biggest layoffs this year, and who is affected.

5 Ugly Tech Layoffs

Cisco Systems, Inc. (NASDAQ:CSCO) just announced it will lay off about 14,000 workers, nearly 20% of its worldwide workforce. While summer layoffs are an unfortunately regular occurrence at CSCO — with cuts of 6,000 jobs for an 8% reduction in 2014 and cuts of 4,000 for a 5% reduction in 2013 — the scale of these layoffs is far from normal. When Chuck Robbins took over from longtime CEO John Chambers last year, investors hoped big changes were in the works to right the lumbering tech company. This is certainly a big change, but time will tell if it’s the right one.

Intel Corporation (NASDAQ:INTC) announced in April it would be laying off 11% of its workforce worldwide, with up to 12,000 workers getting pink slips. The reason should be obvious to anyone who has paid attention to tech trends, with a steady shift away from PCs and laptops creating headwinds for the chipmaker in recent years. When CEO Brian Krzanich took over in 2013, he pledged to push the company into a mobile age … but sales have been stagnant and the company seems intent on cost-cutting rather than innovation these days.

Microsoft Corporation (NASDAQ:MSFT) cut 1,850 jobs in its smartphone unit this year as the Windows Phone continues to lag behind competitors, and after selling its “feature phone” business to Foxconn it also transferred 4,500 employees over to the Taiwanese manufacturer — many of which we can assume didn’t stick, or didn’t go eagerly. This comes after eliminating 7,800 jobs and laying off a staggering 18,000 workers in 2014, as the aging tech company looks to adapt to a post-PC age.

International Business Machines Corp. (NYSE:IBM) has been restructuring in a big way this year, and while it has declined to report hard numbers, The Wall Street Journal reported in May it could cut as many as 14,000 workers. Adding insult to injury, IBM has angered some by reducing severance packages to simply a month’s pay regardless of seniority — a sharp move from compensation that involved as much as six months’ pay in the past. IBM remains one of the biggest tech players in the world with its fingers in many pies, but Big Blue has lacked the agility and innovation to maintain dominance as smaller players in cybersecurity, cloud computing and enterprise technology have started to come into their own.

Broadcom Ltd. (NASDAQ:AVGO) sealed a $37 billion merger with chipmaker Avago, but the merger was clearly all about efficiencies — and that means cutting back the workforce. In March, Broadcom announced it would cut 1,900 jobs worldwide after the merger. With high-profile mobile customers, chief among them Apple Inc. (NASDAQ:AAPL), at least Broadcom is better positioned than some PC-focused companies on this list. Still, as the consolidation continues in the chips space, being a player in mobile isn’t enough to save all your workers from pink slips.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.

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