RSSIs there any sense to Microsoft's 800 layoffs?
By Joe Wilcox | Published November 4, 2009, 3:14 PM
Today's Microsoft layoffs -- 800 employees -- are surprising. Following the last round, executives seemingly slammed the axe into the chopping block, even though the full number of 5,000 layoffs planned over 18 months hadn't been met.
Late last night, TechFlash first reported that layoffs would be coming today. Microsoft started informing employees today, in what surely has to be an unexpected misfortune. So much time has passed since the last layoffs, the threat of more surely faded. For good reasons. Until these 800 pink slips, there were reasons to be cheerful on the Microsoft campus.
Microsoft's recent fiscal 2010 first-quarter results, where cost-cutting measures helped lift profits, are reason enough to be stunned by today's layoffs. Microsoft beat Wall Street consensus. Typically companies announce layoffs right before or after troubling earnings results -- not when the numbers are good, or in this case better.
Something else: Windows 7 just launched, with Microsoft reporting strongest desktop operating licensing sales ever. Windows Server 2008 R2 released same day, and Microsoft has cued up lots of other products for preview or release, including Office 2010, Office Web Apps and SharePoint 2010, among others.
Other reasons to be cheery:
- Zune HD rocks.
- Windows 7 advertising looks great.
- Microsoft will take over Yahoo search.
- New MSN portal is in preview, and it looks good.
- Bing is doing well, and the marketing campaign sizzles.
- Microsoft has opened two new retail stores, in Arizona and California.
- Microsoft's Professional Developer Conference opens in less than two weeks, where Azure Services Platform could actually launch for real.
Windows Mobile is the only stink coming out of Redmond right now. OK, there are Office Accounting's imminent demise and slashed Online Services fees.
So what do Microsoft executives know that you or I don't? It's the only question to ask regarding the layoffs' timing. I'll propose some possible reasons, befitting my wicked, conspiracy-thinking ways. I ask you to dispute my reasons or offer up others in comments. None of my suggested reasons are mutually exclusive.
1. Microsoft announced the layoffs now, when mood is better inside and outside the company, to finish off with the bad news. Supposedly, today's layoffs more than complete the expected 5,000. Remaining employees can throw off their sense of dread (Can you say "uplifted morale?") and Wall Street can finally focus on all those new products in the pipeline.
2. Five weeks into the new quarter, Microsoft sees the econolypse continuing to pull downward on enterprise sales, even with Windows 7 and Windows Server 2008 R2 freshly released. Microsoft already set lower expectations for Business division results, of which Office accounts for 90 percent sales. Proactive cost cutting now would be beneficial in the future, even if only to show Wall Street that Microsoft cut first and asked questions later.
3. Windows 7 OEM license orders are way down for the quarter. Fiscal 2010 first quarter's record Windows 7 license shipments corroborate earlier reports of a surge in PC component orders, which raise concerns that OEMs shipped or are shipping massive amounts of computers into the retail sales channel. Will holiday demand meet supply? For Microsoft, the answer doesn't much matter, if licensing orders are down in fiscal second quarter because they were up so high earlier.
4. Microsoft planned on tweaking employee headcounts anyway -- preparation for taking over Yahoo's search operations. This way, Microsoft can roll together all the remaining layoffs with Yahoo search integration cutbacks, which for the future would better boost employee morale and negate outside perceptions about the company. Layoffs typically generate negative press.
5. Dan Lyons hit a nerve that sent Wall Street analysts and Microsoft investors screaming. Lyons' October 29th Newsweek commentary, "The Lost Decade: Why Steve Ballmer is no Bill Gates," is a scathing indictment of Microsoft's current CEO. Commentaries like this rattle analysts, CEO peers and investors, who in turn shake a company. An attack so personal can lead to reaction or overreaction, with Ballmer putting on a tougher guy face and cutting where Wall Street would like to see it. By the way, Lyons (aka "Fake Steve Jobs") is wrong about Ballmer's leadership. That's a topic I'll blog about later.
I would be saddened and disturbed if Microsoft rewarded the Windows & Windows Live group with layoffs. Typically, launch of a new Windows version is path to Microsoft promotion, not pink slip.
microsoft probably doesn't need to layoff that many people.
if it didn't need them to begin with, then they should have been layed off when the times were good.
microsoft is just using the excuse to improve its bottom line.
however, there are other issues with the bottom line.
the fact is that at one point, the market will be saturated with microsoft products that sales will ultimately bottom out.
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|Is It really any supprise that most companies are laying people off?? This is the perfect economic weather for companies to cut dead weight. It is easier to tell someone times are tough we can't afford to keep you around and not get sued. Granted they need to be chopping heads a little higher up the pay scale.
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|They are just putting pressure on their employee that's all.
You are not safe, you'll never be ....
Good earnings, bad earnings, good times bad times, you are under the axe forever.
As long as most "managers" will equate, in fact, whatever they say, management with fear, productivity with "pressure" and efficiency with short term ...
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|Yap.
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|with jobs being lost just about everywhere. For microsoft to keep laying people off when they have billions in the bank is just wrong. Do the right thing and retain your workers even if it costs you money.
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|Yeah. You've got money Microsoft. You should throw it away on assets you no longer need! These people are *entitled* to jobs at Microsoft...even if they're no longer needed!
Gotta love the massively overblown sense of entitlement around here.
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|It's actually an employee's fault for getting fired in vast majority of the time. Even if the employee is NOT managed properly (God knows I myself don't maximize the potential of people under my command), then a PERMANENT-TO-BE employee will SHOW SOME INITIATIVE to make sure he's worth his salary. Even if the project is a complete money-loss, a good employee showing initiative WILL BE RETAINED and simply suffled around. Priod.
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|Lots of bureaucracy to get rid of. Plus discontinuing Office Accounting. Probably killing off parts of MS Dynamics as well.
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|Looks like Vista 7 isn't helping much. By next year, hopefully Microsoft completely folds...
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|Let's think about this, shall we? Without Microsoft, Apple would have very little competition from other companies in terms of the Micorosft v Apple battle. Essentially, Apple would no longer have to innovate in order to compete and they would essentially become stale and could literally drive prices as high as they would like. So, in theory, Apple would become the next big monopoly. Wait a tic, isn't that exactly what the Apple fanbois bash Microsoft about?! Wow, amazing how a little thing like logic and prediction works, huh?
So, all your bantering and complaining and wishing would actually be a bane upon your beloved Apple. I personally hope Apple gets more of the market share simply so that Microsoft and Linux continue to innovate.
So, go ahead, keep wishing...
I swear, the lack of fanboi intelligence just baffles me.
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|Be careful what you wish for sentiments aside,
a company valued at 250 billion dollars simply does not fold. I suppose that can be a blessing in one way, but also a curse for a company the size of Microsoft or Apple as the management can never really impart the make-or-break urgency of say an internet start-up or Palm to it's engineers...
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|If MS folds who will bail out Apple the *next* time they're about to go under?
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|LOL... I mentioned the bailout in another thread, but yeah... exactly!
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|@HydrantHunter: Apple has something like $25 billion in the bank right now and no long-term debt. Even in 1998, $150 million was pocket change to them.
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|@bousozoku: Granted, it was more of a symbolic gesture. I was trying to subtly take advantage of that symbolism in my response and I guess I failed :\
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|@HydrantHunter: Yes, you need the smilies and the winks to express that fully. ;)
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|Unlike Microsoft, Apple will always continue to innovate and Apple is a company that can do no wrong.
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|Apple is a company that has been doing very wrong from its inception. Keeping technology only for the rich snobs is the wrongest of all, definitely wronger than creating the cheapest, crappiest, totally immitated Chinese clone of ANY product known to mankind. Walmart & Microsoft are thus just about modern-day proof for divine intervention. ;)
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|Let's see if they hire a large number of H-1B visa holders to cut costs over what they'd be expected to pay U.S. citizens. That may sound protectionist, but Microsoft is one of the larger companies lobbying for more H-1B visas every year. I doubt it's out of a desire to help people in poorer countries or that the U.S.A. doesn't produce enough talented workers, especially in the current labour situation.
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|Excuse me Joe, but could you explain how it was MS' best Windows client sales ever, when the client division came in at -4% YoY INCLUDING deferred revenue? Have I got the numbers wrong or is there something else amiss?
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|BreakingNews
Microsoft tells BNO News it is not cutting 800 more jobs in addition to the 5,000 announced in January, despite Associated Press report.
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|@artfuldodga Really? Microsoft spokesperson has offered multiple confirmations and there are now Microsoft employees posting on personal blogs about being laid off. Do you have a link?
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|800 might be getting laid off, but is that in addition to 5000 previously announced? no real links from BNO feed on twitter
regardless, i encourage layoffs, esp with Microsoft, they were in excess to say the least and trimming is good for them but obviously difficult to be on the laid off side of things
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|Of course there's sense to it. They're simply cutting the fat. Nothing wrong with that. Companies, especially nowadays are consolidating different roles. I know this first hand as I have quite a few friends in the hospitality industry. Luxury hotels do this all the time, even when they're doing well.
Where you used to have Financial Controllers and Assistant Financial Controllers, you now have Directors of Finance. You'd have Assistant Rooms Managers who'd report to Room Managers who'd report to Hotel Managers who'd report to the General Manager and now 2 of those levels are cut with the General Manager micromanaging these fields and dealing directly with the assistant roles, who take on more responsibility as well but no real increase in pay but perhaps a retitle.
This is how they increase net profit without worrying about revenue actually coming in. You have the same roles being performed....sometimes shared between the upper and lower level employee but in worse case scenario, shunted on to the lower level employee who is either not or given a very minimal raise.
While the 2 are technically different, as one is a service industry and the other, not....I suspect it's a similar situation. You don't really want to pay a 'X Manager' when 'AB and C' can complete the same task sucessfully, so why not get rid of X Manager, save the company 80000 or so a year and the cost of benefits. 800x80000 or more, yum.
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|"Microsoft sees the ************ continuing to pull downward on enterprise sales,"
Use of that word should be an offense for which the Death Penalty is an immediate and unassailable response.
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|no one is escaping this flourishing economy unscaved.
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|unscaved?
Define, please.
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|re: "no one is escaping this flourishing economy unscathed"
Heh. That's actually pretty funny. Mind if I steal it? [grin]
re: "Lyons (aka "Fake Steve Jobs") is wrong about Ballmer's leadership"
Couldn't agree more. Lyons is so far removed from how decisions are actually made within Microsoft, it's ludicrous. I get the impression he's straight up making stuff up for the purposes of linkbaiting.
Ballmer has been the engine behind Microsoft's growth since Gates was effectively removed as CEO and given the title of Chief Software Architect. (by himself) Gates is a tech - not a business man. Ballmer knows business and is the primary reason, for example, Microsoft's Server & Tools business has become the steady 3rd pillar of profitability for the company, along side the Client & Office/Business divisions.
He also [bravely] greenlighted the $7B budget for Xbox and was instrumental in enabling the division to establish its own identity separate from the slower moving core businesses. While he hasn't paid as much attention to Zune, Online, or Mobile historically, contrary to popular belief, these business are incubational & frankly "budget dust" relative to the other divisions in terms of operational expenses minimizing their drag so-to-speak on the company.
As a stockholder, I'm more concerned about life AFTER Ballmer because unlike Gates-Ozzie, I don't see a viable successor in the executive tree.
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|Jack Welch had a goal to cut the bottom performing 10% of employees every year, to keep GE healthy as an organization. Microsoft cutting 4% is doing just that. If Balmer wants to blame it on the economy to make it sound less mean, then that's up to him.
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