January 23, 2008

Recession Letter

Is the United States getting ready for a recession? It all depends on who you talk to. Most experts agree that we are in a slow period, but time will only tell if we are in mist of a recession.

A letter sent to employees at a Silicon Valley company in October 2001:

Due to the current economic conditions we have seen our business decline from $132 million annually to a current run rate of approximately $40 million annually. The $40 million run rate is the consistent amount that we have been achieving over the last six months. The management team has spent a significant amount of time analyzing and evaluating our expense structure and employee base. We have over the last few months made a number of changes to reduce expenses to regain profitability to the organization. While this has not been easy, we have made a lot of progress.

We believe that we now have enough information to further right size the organization to the current market demand which appears to have stabilized. In right sizing the organization, we have had to further reduce our staff by five employees. In order to have the current expenses not exceed current profit, as well as to retain employees, the management team has to implement a companywide 10% salary reduction. While this is not easy, this is necessary to make sure that we have a healthy company that will be here through these tough times. At the same time, we will continue to look for other ways to control and reduce expenses.

It is fully our intention to reverse this reduction once we return to a reasonable profitability level which is maintained for three consecutive months. The management team will define this level of profitability during the next quarter. This reduction will be effective November 1st and will be reflected in your November 15th payroll check.

If you have any questions about this, please see your manager or stop by my office. I believe that we have a great staff and I also believe that we have all the tools we need to grow this company. Thank you for your understanding.

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