Microsoft’s new CEO Satya Nadella dropped the other shoe today by announcing layoffs of up to 18,000 employees over the next year. 13,000 will be announced imminently and of those, “our work toward synergies and strategic alignment on Nokia Devices and Services is expected to account for about 12,500 jobs, comprising both professional and factory workers.” I expect that, as usual, it’s better to be working for the the absorber than the absorbee.
As for the remaining 5,000, “the vast majority of employees whose jobs will be eliminated will be notified over the next six months.”
Microsoft today announced 3 new division presidents ostensibly to fill the voids left by the departures of Robbie Bach (Entertainment and Devices) and Stephen Elop (Business). However, it mostly looks like the temporary scheme which had the former direct reports to the division presidents reporting to Steve Ballmer has been institutionalized with some promotions:
In a statement this morning, the company said it is naming Kurt DelBene to head the Microsoft Office Division, Don Mattrick to head the Interactive Entertainment Business, and Andy Lees to head the Mobile Communications Business, effectively leaving things as they have been following the departure of Stephen Elop (who was named Nokia CEO last month) and the announced retirement of Robbie Bach.
DelBene’s group, which is focused on the Office set of products, is somewhat narrower in focus than the one vacated by Elop, which also included the Microsoft Dynamics line of customer relationship management and enterprise resource planning products for midsize businesses. The Dynamics business will continue to be headed by Kirill Tatarinov, who will report to Ballmer.
The moves essentially leave all of Microsoft’s businesses in largely the same hands they have been in. Lees and Mattrick have been running their units since Bach announced plans to retire in May. Following Elop’s departure, DelBene has been jointly running Office with fellow executives Chris Capossela and unit CFO Amy Hood. Capossela, the longtime head of Office marketing, and Hood will remain in their roles, reporting to DelBene.
And even more evidence that there is less here than meets the eye: the five business unit financial reporting structure will stay the same.
NPD and Morgan Stanley Research are reporting that notebook PC sales growth (monthly year over year) has been in decline since Apple’s iPad was released and now has gone negative. There are undoubtedly a number of factors at work, but the iPad is surely a major one. Best Buy CEO Brian Dunn “said internal estimates showed that the iPad had cannibalized sales from laptop PCs by as much as 50 percent.”
While this is certainly hard cheese for the PC makers, there is someone else who is taking it on the chin: Microsoft. Almost all of those laptops PCs that didn’t move were running the Windows operating system and many would pick up some version of Microsoft Office as well. Those sales have now vanished and when the Microsoft Windows and Office cash cows stumble, so does Microsoft. Stand by for some interesting earnings reports from Redmond.
Update: There’s a lot of skepticism about Best Buy CEO Brian Dunn’s statement and he’s now backpedaling rapidly without denying he said it. I tend to think it was simply a misstatement since the implied hit on notebooks sales is so much larger than the Morgan Stanley report would require. Speaking of which, a comment from the author of the Morgan Stanley article says that the sales figures showing the decline include netbooks. That is better news for traditional PC makers, but since most netbooks these days run Windows, it is cold comfort for Microsoft.
Microsoft today announced a major shakeup in the continually troubled Entertainment and Devices Division via a letter from Steve Ballmer to employees:
Robbie Bach and J Allard, founding fathers of Microsoft’s Entertainment & Devices Division, are leaving the company as part of a broader restructuring that will give CEO Steve Ballmer more direct oversight of consumer businesses including Microsoft’s struggling mobile unit.
The changes — a major management reorganization, even by Microsoft’s standards — will reshape the division leading the company’s battles against Google, Apple, Sony, Nintendo and other rivals in the hard-fought consumer technology market.
Bach, 48, president of the division since its inception five years ago, isn’t slated to be replaced. That will effectively dissolve the division’s current structure and leave the existing Xbox and Windows Mobile leaders to report to Ballmer starting in July.
Microsoft is describing Bach’s departure as a retirement. He said the decision was his own, and he wasn’t encouraged to leave. He’ll remain at Microsoft through the fall, to ensure a smooth transition.
Speaking with TechFlash, Allard said his decision was unrelated to the recent cancelation of the "Courier" dual-screen tablet project that he had championed inside the company. Allard said he doesn’t plan to work for Apple, Google or any other Microsoft rivals. After 19 years at the company, he said, he wants to devote more time to his personal interests, particularly adventure sports.
The separation of the Windows Mobile unit from the current Entertainment & Devices reporting structure also reflects the company’s efforts to connect its mobile initiatives with a wider range of products, including its online services and traditional software.
Don Mattrick, the senior vice president in charge of Microsoft’s Interactive Entertainment Business, will report directly to Ballmer as part of the management changes, as will Andy Lees, the senior vice president who leads the Mobile Communications Business.
Windows Web Services is born. Antoine Leblond, who has been Senior Vice President of the Office Productivity Applications Group, is moving to a new role: Senior Vice President for the Windows Web Services team. What is Windows Web Services? Good question. CEO Steve Ballmer’s e-mail describes it as “integral Windows services that today deliver updates, solutions, community and depth information for the Windows consumer.” Leblond will be reporting directly to Windows/Windows Live President Steven Sinofsky.
Office gets a new engineering chief. Kurt DelBene, Senior Vice President of the Office Business Productivity Group, is now head of all of the engineering responsibilities for the Office business.
Former Live Platform Services head David Treadwell moves out of the Windows division and into the Interactive Entertainment Business (the part of Microsoft that oversees Xbox and video games).
Xbox has finally started making money after the billions poured into it, but the Windows Mobile story was acknowledged even by Microsoft to be a vast missed opportunity verging on a disaster. Microsoft doesn’t like to lose markets where they used to have a commanding presence. The other entertainment products are yawners (e.g. Zune), but Mac Office is still a money maker and customers still love Microsoft keyboards and mice. Unfortunately they are the smallest and least visible part of the E&D menagerie.