Bloomberg’s Big Miss in Silicon Valley Hiring Story

An analysis forgets mergers and acquisitions

Bloomberg News reports on the hiring spree in Silicon Valley, possible evidence of “Web Bubble 2.0.”

But it makes some big mistakes that undermine its the story’s credibility thesis.*

Bloomberg says that about half of $100 million market-cap companies increased their workforces by more than 50 percent over a two-year span:

Among U.S. technology companies with a market value of more than $100 million, almost 50 increased employment by more than half in the most recently reported two-year period, according to data compiled by Bloomberg. Some small and mid-size businesses boosted payrolls by almost fivefold, underscoring the resilient demand for Internet services, software and electronics.

It’s interesting, but all by itself it doesn’t tell us a whole lot. Wouldn’t we expect growth companies to have volatile employment figures? Are these numbers different now from the previous two-year period? Were these really all hires or were they added in deals?

The latter is the big gaffe here: Bloomberg doesn’t take into account the effects of mergers and acquisitions. It counts jobs added by a company because of deals as new hires. But these aren’t new jobs. They’re just consolidated jobs.

These paragraphs, for instance, are a combo of misleading and false information: Group Inc. (WWWW), a Jacksonville, Florida-based provider of website services to small businesses, grew the most on the list in percentage terms. It has 1,148 employees, according to its most recent annual report, a 380 percent gain from two years earlier.

Silicon Graphics International Inc. ranked second, increasing its employment 372 percent to 1,500, followed by Kit Digital Inc. at 319 percent and Riverbed Technology Inc. (RVBD) at 208 percent. Apple, which started with a larger employee base, grew 76 percent. That amounted to 26,100 new jobs.

All of these companies made major acquisitions in the last couple of years. bought in 2010, nearly doubling the company’s revenues. also doubled its market cap by buying Network Solutions in October, adding hundreds of employees. These aren’t new jobs created (lots were cut, actually), just jobs newly under the same roof.

Moreover, Bloomberg is imprecise in telling us what timeframe it’s examining. It says the numbers are from “the most recently reported two-year period” and “the past two years.” I don’t think there is such a thing as “the most recently reported two-year period.” I do know what the “past two years” means, and it’s not Bloomberg’s meaning.

Bloomberg is apparently looking at the past two annual reports. I know that only because I pulled Silicon Graphics’s annual reports to try to back into Bloomberg’s numbers—something readers obviously shouldn’t have to do. SGI reported it had 318 employees on January 3, 2009 and 1,500 employees on June 24, 2011, which gets you the 372 percent gain Bloomberg tallies.

But again, this shows how Bloomberg’s story is misleading. This number is just wrong. Silicon Graphics merged with Rackable, which bought it out of bankruptcy and took its name, in April 2009. The original Silicon Graphics already had 1,200 employees. Rackable already had 300 at the time.

In reality, Bloomberg’s reported 372 percent jobs gain at SGI is actually 0 percent, and it’s probably negative, since Silicon Graphics has also made several other acquisitions during that span, including SGI Japan, which added 272 employees to the company.

Kit Digital’s 319 percent gain is also wildly inflated. Here’s a list of that firm’s 2009-2010 acquisitions: Narrowstep, Benchmark Broadcast Systems, Nunet, The Feedroom, Multicast Media, Megahertz Broadcast Systems, Accela Communications, and Brickbox Digital Media. These companies had at least 500 employees between them, according to the companies’ press releases and prospectuses, and Kit has 720 workers, according to its August 2011 annual report. Kit had 172 employees as of April 1, 2009, which means it has added fewer than 30 net jobs. That would be roughly 4 percent, not 319 percent—and that’s assuming I haven’t missed any acquisitions.

Similarly, Riverbed Technology has made at least three acquisitions in Bloomberg’s two-year span.

None of this is mentioned in Bloomberg’s story (though it does note the effect of Intel’s deals on its employee count), and that undermines the credibility of the whole piece.

* The faulty anecdotes undermine the credibility of the story’s argument, not Bloomberg’s credibility. I’ve changed the second paragraph to better reflect what I meant.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,