US GDP Steady, Intel's Historic Loss, CompTIA's For-Profit Shift & Tech Hiring Trends

[00:00:02] It's Monday, November 4th, 2024 and I'm Dave Sobel. Three things to know today.

[00:00:06] US GDP growth holds steady at 2.8% when we look at the job market.

[00:00:11] Intel reports a record $16.6 billion loss amid layoffs and depreciation.

[00:00:18] And HIG Capital and Tama Bravo to acquire CompTIA's certification business, transitioning to a for-profit model.

[00:00:26] This is the Business of Tech.

[00:00:30] The latest GDP report indicated a 2.8% annualized growth rate for the July to September period,

[00:00:37] building on a 3% increase in the previous quarter. Consumer spending played a significant

[00:00:42] role, rising at a 3.7% annualized rate, contributing nearly 2.5 percentage points to overall growth.

[00:00:49] And the October jobs report revealed stagnation in job growth with only 12,000 new jobs added in a month,

[00:00:56] where total employment reached $159 million. This disappointing outcome, exacerbated by hurricanes

[00:01:02] and labor strikes, suggests potentially underlying weakness in the labor market.

[00:01:07] According to Zip Recruiter Chief Economist Julia Pollack, the report reflects a broader trend of

[00:01:13] a slower labor market, even as the unemployment rate remains steady at 4.1%, the lowest heading into

[00:01:20] a presidential election since 2000. Notably, revisions to previous payroll numbers indicated a loss of 112,000

[00:01:29] jobs in August and September, and the share of adults employed fell by 0.2 percentage points.

[00:01:35] Tech employment remains stable, according to a recent analysis by CompTIA. The tech unemployment rate

[00:01:41] held steady at 2.6% in October, while the national unemployment rate also remained unchanged at 4.1%.

[00:01:48] The report highlights a positive trend in hiring, with 223,000 new job listings for tech positions

[00:01:54] and an increase of 70,000 tech professionals in the workforce, bringing the total to nearly 6.5 million.

[00:02:02] However, employment within the tech industry sector saw a slight decline, losing 4,029 jobs.

[00:02:08] According to the National Federation of Independent Businesses' October jobs report, small business

[00:02:14] employment remains steady despite ongoing labor market challenges. The report reveals that 35%

[00:02:20] of small business owners reported unfilled job openings, the highest since January 2021. Hiring efforts have

[00:02:28] decreased, with only 53% of owners attempting to hire, down 6 points from September. Notably, 46% of those

[00:02:36] hiring reported few or no qualified applicants, while 25% found only a few qualified candidates.

[00:02:43] Additionally, job vacancies were most pronounced in construction, transportation, and the wholesale sectors.

[00:02:49] Despite a net 31% indicating they raised compensation, this marks the lowest increase since April 2021.

[00:02:58] A recent study by the International Workplace Group reveals that 95% of CEOs have invested in new technology

[00:03:04] over the past year to enhance hybrid working, with 43% identifying technology as their largest investment.

[00:03:10] Looking ahead, 87% plan to continue funding advancements in areas like cloud, AI, and security,

[00:03:17] driven by the desire to improve employee experiences and achieve cost savings.

[00:03:21] Notably, only 21% of individuals are willing to commute more than 30 minutes for a job,

[00:03:27] prompting businesses to ship from traditional downtown offices to regional spaces.

[00:03:37] The study indicates that hybrid work has increased productivity for 74% of employees and job satisfaction for 85%.

[00:03:48] Mark Dixon, CEO of International Workplace Group, emphasizes these investments reinforce a long-term

[00:03:54] commitment to hybrid working.

[00:03:57] Why do we care?

[00:03:58] These reports highlight that while the labor market is still growing, the pace is narrowing,

[00:04:03] raising concerns about future employment trends.

[00:04:05] And the findings underscore the persistent struggle small businesses face in filling positions amid a

[00:04:11] tightening labor market. So SMBs are likely under more pressure than their larger counterparts.

[00:04:17] And that may be less true for the IT services companies serving them.

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[00:05:16] Intel has reported a staggering 16.6% billion dollar loss for the third quarter of 2024, marking the

[00:05:23] largest quarterly loss in the company's 56-year history. This loss stems from $15.9 billion in asset

[00:05:30] depreciation and a $2.8 billion restructuring charge following layoffs of over 15,000 employees.

[00:05:37] Despite a 6% drop in total revenue to $13.3 billion, the company's projections for the current

[00:05:43] quarter estimate revenue between $13.3 billion and $14.3 billion, which is still lower than the

[00:05:50] previous year's figures. CEO Pat Gelnziger emphasized the urgency in addressing the company's

[00:05:55] challenges as Intel's share price has plummeted 60% since he took the helm in February 2021.

[00:06:02] Meanwhile, competition from firms like Nvidia and AMD in the booming artificial intelligence

[00:06:07] chip market has intensified as Intel struggles to regain its footing. And in a historic milestone,

[00:06:14] Reddit has reported its first profitable quarter as a public company, achieving a net income of $29.9

[00:06:20] million on revenue of $348.4 million for the third quarter. This marks a significant financial

[00:06:27] turnaround with the executive noting much higher adjusted earnings before interest, taxes,

[00:06:31] depreciation and amortization than anticipated. Following the announcement, Reddit shares

[00:06:36] surged over 20% in after-hours trading, reflecting strong investor confidence in the company's

[00:06:42] performance amidst its recent AI licensing goals. Why do we care? Well, Intel is increasingly under fire.

[00:06:51] While I suspect most providers aren't dependent on Intel, with the Windows 10 to 11 refresh ahead,

[00:06:56] a significant choice is whether the long idea of Intel inside is significant. On the other hand,

[00:07:03] the insight with Reddit is how much data matters. The value of an organization can change significantly

[00:07:09] with data. HIG Capital and Tama Bravo have signed a definitive agreement to acquire CompTIA's brand and

[00:07:19] products. CompTIA, known for its vendor-neutral credentials, has awarded over 3.5 million certifications

[00:07:25] globally, focusing on areas such as cybersecurity and cloud computing. Following the acquisition,

[00:07:31] CompTIA will operate as a for-profit company under HIG and Tama Bravo's ownership. Its existing

[00:07:39] membership-based 501c6 nonprofit organization will be separated from CompTIA and continue its mission

[00:07:46] of service to the IT industry. The transaction is expected to close in early 2025, pending regulatory

[00:07:53] approval. MJ Shore of CompTIA posted online, quote, the result of this split will ensure the financial

[00:08:00] solvency of the association in perpetuity, allowing us to increase our global focus and develop even

[00:08:06] more meaningful member benefits, end quote. Why do we care? The training business is now a for-profit

[00:08:14] business. Any pretense of we do this for the industry is gone as it relates to training. That likely

[00:08:20] doesn't matter. Just note that profit is now the motivation, not the industry's platitudes. Thus,

[00:08:26] CompTIA certification is no longer similar to the American Bar Association's mission to serve the

[00:08:32] public. CompTIA sells the parts of its revenue-generating lines of business that were making money and

[00:08:37] supporting the association, leaving a critical question. Is that association capable of being

[00:08:44] standalone? To date, it has not been required to do so. And so the question is this. Do you believe that the

[00:08:50] mission of service to the IT industry is defined enough? And are these the leaders that are capable of

[00:08:56] executing through that mission? Shower's comments imply an endowment model where the association operates

[00:09:02] off annual payouts from its investment portfolio. We'll have to see what comes of this. You should re-evaluate your

[00:09:09] relationships with the now for-profit certification business and the now differently funded association

[00:09:16] as long as this deal goes through. Are you ready to get your brand in front of the tech leaders shaping

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