Analysts say some of today's layoffs stem from management deciding to move proactively rather than waiting until it's too late and having to react to a bad situation. But being proactive doesn't always result in the best scenario. In Covad's case, when cuts were announced, McMinn said he was sure the company could pull off its plans with a smaller staff, but he acknowledged that operations would be tougher with a shrunken head count. Many in the industry share McMinn's concerns. Even some Wall Street analysts say layoffs are not a panacea for today's telecom woes.
Management has to do what's right for the company.
They shouldn't just make cuts to placate their shareholders and Wall Street. Even after a few months of layoffs, most telecom stocks have not recovered and have actually fallen, he points out. Whatever they're doing is not working. Many are questioning whether layoffs truly pay off in the long run. Several studies indicate that the fallout can have a negative effect.