Re: Any $ Tips about going Contractor to Perm in Same Firm?

Subject: Re: Any $ Tips about going Contractor to Perm in Same Firm?
From: Bruce Byfield <bbyfield -at- axionet -dot- com>
To: "TECHWR-L" <techwr-l -at- lists -dot- raycomm -dot- com>
Date: Sat, 24 Mar 2001 18:29:11 -0800

Berk/Devlin wrote:

> So, here are reputable companies, companies
> with reliable products, companies that will bounce back (I believe), whose
> stock prices are down to 1/4 of what they were just a few months ago. This
> lack of funding leads to hiring freezes, employee disillusionment, etc.
> etc.

If I can use your comment as a springboard (rather than answering or
comment on anything you actually said):

I think that the evaluation of a company by its stock price is the
last remaining legacy of the dot-com bubble. It's important to
remember that stock prices are simply what people are willing to pay
for shares in the company. Especially in recent years, stock prices
have only a tangential relation to the actual value of the company.
In the height of the dot-com bubble, I even heard CEOs say that they
weren't interested in profit, or in concrete business deals - just
in publicity that would lead to a record-breaking IPO or drive stock
prices up. That's ridiculous, of course. Yet, now, people are
believing the flip side of this attitude: if a company's price goes
down, the company is less desirable.

>From a potential employee's viewpoint, it's far more important to
find out what volume of business a company is doing, who it is
partnering with, and (in the case of a new company) how fast it's
going through its venture capital and how much is left. Estimates of
when a company expects to be profitable can usually be ignored or
seriously downplayed, since they're almost always officially
optimistic, but any information about the company's profitability in
the last year is also useful; if a company isn't profitable, you at
least want to see progress towards profitability. But the point is,
these statistics are virtually unrelated to stock prices. Many
buyers aren't interested in long-term investment, so a company's
business interests aren't a factor in their decisions to buy or

One of my own personal indicators is comparing the number of
employees to the operting expenses. In most major centers, you can
get the average salary of a high-tech employees from a number of
different sources, and many business profiles mention the number of
employees at a company. If you multiply these two figures, you can
soon find how much of the expenses is due to salary. In my
experience, a company which spends more than 50% of its expenses on
salaries is probably bad news. It's overstaffed - probably because
the CEO's ego depends on the number of employees (he says,
cynically). That means cuts, sooner or later. And, because you'll be
a new hire, you're likely to be one of those cuts if you join. Also,
of course, a company that doesn't control staffing levels isn't
likely to be competently run, and therefore unlikely to survive in
the long run. You might want to join it anyway, but expect to bail.
Over the last six years, this indicator has been completely
successful in predicting the long-term health of local companies for

Bruce Byfield 604.421.7177 bbyfield -at- axionet -dot- com

"I'm so glad my mother's not around
To see me in a state of such repentence,
I'm so glad she's not around to see -
I'll be out before she finishes her sentence."
-Jez Lowe "(You'll Not Find Me Back In) Durham Gaol"


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