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The New Year’s Day Microsoft buzz is a rumor of a huge 17% layoff at Microsoft on January 15:
The rumor that Microsoft was set to lay off people on January 15th, 2009 is no longer a rumor but a fact. Staff at Microsoft have been informed that the company is readying major layoffs to its worldwide operations and it’s not a small cut, either.
Currently Microsoft employs about 90,000 people across the world and from what we’re hearing, some 15,000 of those are expected to be giving marching orders come January 15th. That’s almost 17 percent of Microsoft’s total work force, not exactly a small number.
Frankly, the number is so large as to be unbelievable given the fact that to all appearances, Microsoft’s business does not seem to be all that bad despite the economic downturn. Could there be some really gloomy news on the way?
At the Mini-Microsoft water cooler (which was the original source of last week’s rumors) there is a new post detailing some comments to the effect that there will not be any layoffs at all. However, the crowd isn’t having any of it and the general theme is that while there may not be across-the-board layoffs, many projects may feel the axe. A sample:
From 12/23/2008, a more likely scenario that feels like a layoff but gives corporate cover:
MS will not do straight layoff. It will re-org, and cut groups/projects. Say 2000 FTE are given 4 weeks to land a new job within MS, I bet 1500 will find nothing and will be forced to leave. So no layoff, let’s call it "reorg-off" and MS can even save layoff package.
In-line with that, from 12/21/2008, bringing up an interesting point about H1Bs:
[T]his company simply could not go through a round of layoff (mind you I did not say a RIF, as we’ve all seen those) but the H1-B rules would force all of the cheap labor to be shown the door first, regardless of ranking. And Microsoft lives for ranking. Microsoft wakes up in the morning and get an enormous boner over rankings. So don’t suggest for a second that there is some dismal, far reaching lay off coming down the river.
…
It’s a layoff masked as rhythm-of-business reorganization plus performance management plus Not To Exceed staffing budgets being strictly enforced.
Such a selective pruning is best, of course, but invariably it gets embroiled in a massive amount of corporate politics which is why companies often opt for across the board cuts.
In Microsoft’s case, how would you trade off projects in the cash cows like Windows, Office or Server & Tools versus Steve Ballmer’s "big bet" cash sinkholes in Entertainment & Devices and Online Services? I know how I would do it (good bye E&D!), but more to the point, how would Steve Ballmer trade them off while saving face? Non-optimally, I’m sure.
The Microsoft water cooler at the Mini-Microsoft blog is rife with rumors of impending layoffs scheduled for January 15, 2009:
Rumors. Microsoft layoff and cut-backs and Reduction In Force rumors. That’s all I have for you. Rumors and second-hand speculation and the comments left by the fine, good-looking folks who participate in the conversation here. So pour yourself some holiday cheer and dive in.
What have those fine folks been sharing over the past couple of posts here? Bad news on the rise and with perhaps January 15th 2009 as an interesting day for Microsoft news. Bad news. 15 Jan is a week before FY09Q2 quarterly results and it’s better to share as much news, good and bad, before the results are released vs. surprising Wall Street (something I think we’ve learned).
It all starts with…
Just heard on the finance grapevine. MSFT layoffs are coming on January 15th.
They are substantial.
Hit the link for much more, but the possibility of layoffs during the current recession shouldn’t be a shocker even at Microsoft. That’s what companies do during recessions, albeit fairly ham handedly at large companies and that’s what Microsoft is these days. As for Microsoft’s overall business, the outlook isn’t particularly grim although being characterized as a "utility stock" must gall Steve Ballmer:
THE MARKET FOR PERSONAL COMPUTERS IN 2009 WILL be much worse than anyone would have expected just a short while back. But that shouldn’t faze Microsoft (ticker: MSFT).
Shares of the world’s largest software company have fallen 46% this year, worse than the 40% drop in the Standard & Poor’s 500 Index, as investors worry about slipping PC sales.
The result: Microsoft has become a substantial value investment.
With a 2.7% dividend yield and a vast commitment to buying back shares, Microsoft stock is no longer a bet on the PC. More and more, it looks like the stable utility stock of the digital age.
Indeed, the Redmond, Wash.-based giant’s dividend has a better yield than the 10-year Treasury note’s 2.1%. And the company is not likely to disappear from the planet anytime soon.
As long as PCs are sold, in whatever volume, Microsoft continues to be a tax, so-to-speak, on those PCs purchases.
More specifically:
True, the global economic slump continues to humble estimates for how many machines will be sold. But even a worst-case scenario — one in which sales of Windows and other products, such as the Exchange e-mail server, were to decline 10% in 2009 — would probably still generate earnings of $1.90 per share in the 12 months ending in December of 2009, compared with perhaps $1.91 for this calendar year, estimates Cowen’s Pritchard.
That’s analyst Walter Pritchard with Cowen & Co. and whether or not you agree with his exact estimate, Microsoft is not going to be applying for a Washington "bailout" any time soon.
Steve Ballmer’s three week ultimatum to Yahoo’s board of directors to accept the Microsoft acquisition offer passed yesterday with no comment from Yahoo or specific action from Microsoft to carry out the threatened reduction of the offer amount and proxy fight. The next episode in this soap opera is expected early next week and predictions range from Microsoft withdrawing their offer to a full out hammer and tongs proxy battle. The most telling commentary however is likely the desire of Yahoo employees to take the money and Microsoft employees to forget about the whole thing.
Joanne Bradford who is Microsoft’s current MSN honcho and former Microsoft Web ad czar (“We love ad salesmen“) is leaving Microsoft for startup Spot Runner which is nominally an “Internet-based ad agency that makes it easy and affordable for local businesses to advertise on TV.” The trick apparently is to have canned creative content that can be easily modified for a local business. Bradford reportedly will be executive vice president of National Marketing Services, focused on national advertisers” which sounds like a good fit for her and apparently also fits somewhere in Spot Runner’s business model.
As for MSN, former Bradford direct report Greg Nelson, who is the general manager of MSN.com International, will be running things on an interim basis. I would chalk this up as yet more turmoil in Microsoft’s online business – the departure of Bradford’s boss Steve Berkowitz was announced in February. Of course, we’ll really see turmoil if the Yahoo deal goes through and Bradford may well have been dodging exactly that.
