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Microsoft today announced 800 more employee layoffs around the world. The public head counting is bit vague, but a Microsoft spokesman said that the company had already let go most of the 5,000 employees promised in January so today’s 800 layoffs were new and additional. On the other hand. if you like to try to read the tea leaves:
The software maker, based in Redmond, Wash., employed about 94,000 people as of the end of December 2008. At the end of September, about 91,000 people worked for Microsoft, indicating the company has added 2,000 jobs this year.
Perhaps, but it is cold comfort for those laid off although typical of the large corporation that Microsoft has become to be unable to manage their portfolio of activities without gratuitous layoffs whenever an economic downturn provides air cover. Among those laid off was Don Dodge, formerly Microsoft’s Director of Business Development for the Emerging Business Team who has been quoted a number of times on this blog.
Microsoft today reported the results for 4Q of fiscal 2009 and it wasn’t a pretty picture:
Microsoft Corp. today announced revenue of $13.10 billion for the fourth quarter ended June 30, 2009, a 17% decline from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $3.99 billion, $3.05 billion and $0.34 per share, which represented declines of 30%, 29% and 26%, respectively, when compared with the prior year period.
“Our business continued to be negatively impacted by weakness in the global PC and server markets,” said Chris Liddell, chief financial officer at Microsoft. “In light of that environment, it was an excellent achievement to deliver over $750 million of operational savings compared to the prior year quarter.”
The financial results for the fourth quarter ended June 30, 2009, included the deferral of $276 million of revenue related to the Windows 7 Upgrade Option program that was announced on June 25, 2009. This revenue deferral reduced earnings per share by $0.02.
Even worse, the results fell short of what Wall Street had been predicting and Microsoft shares were down 8% in after hours trading.
I haven’t done a detailed look at the segments yet, but even the usually unstoppable Server and Tools was down from last year. A high level summary of 4Q results from the Microsoft report:
Client – Revenue down 29%, Income down 33%
Microsoft Business Division (Office) – Revenue down 13%, Income down 16%
Server and Tools – Revenue down 6%, Income down 1%
Online Services Business – Revenue down 13%, Income down 51% – lost $732M on revenues of $731M
Entertainment and Devices Division – Revenue down 25%, Income up 24% (the loss got smaller)
The long rumored Google operating system for PCs has finally been announced:
It’s been an exciting nine months since we launched the Google Chrome browser. Already, over 30 million people use it regularly. We designed Google Chrome for people who live on the web — searching for information, checking email, catching up on the news, shopping or just staying in touch with friends. However, the operating systems that browsers run on were designed in an era where there was no web. So today, we’re announcing a new project that’s a natural extension of Google Chrome — the Google Chrome Operating System. It’s our attempt to re-think what operating systems should be.
Google Chrome OS is an open source, lightweight operating system that will initially be targeted at netbooks. Later this year we will open-source its code, and netbooks running Google Chrome OS will be available for consumers in the second half of 2010. Because we’re already talking to partners about the project, and we’ll soon be working with the open source community, we wanted to share our vision now so everyone understands what we are trying to achieve.
The Chrome OS is based on Linux and will run on both x86 and ARM microprocessors and Google claims to be "working with multiple OEMs to bring a number of netbooks to market next year." Google’s vision is of a Web operating system running a browser and running Web applications within that instead of traditional PC applications. As for overlap with Google’s Android operating system seen mostly on cell phones, here’s the official delineation:
Android was designed from the beginning to work across a variety of devices from phones to set-top boxes to netbooks. Google Chrome OS is being created for people who spend most of their time on the web, and is being designed to power computers ranging from small netbooks to full-size desktop systems.
Assuming that Google’s vision of a Web operating system and applications appeals to budget netbook buyers as much as shaving the Windows XP license fee, it will definitely impact Microsoft’s Client operating system business which has already been hit by netbooks running the low-priced Windows XP instead of Vista.
However, that is a big assumption since many netbook purchasers are buying them as cheap notebook PCs and expect to run the usual local PC applications (open source or otherwise). As for regular notebook and desktop PC buyers, it harks back to the Linux versus Windows competition for client PCs which so far has not been overly kind to Linux. Still, Google gets points for making things interesting for Microsoft and perhaps they will actually make inroads onto Microsoft’s turf.
The Financial Times is reporting that Microsoft has retained Morgan Stanley to find a buyer for Razorfish, the online ad agency it picked up when it acquired aQuantive a bit more than 2 years ago. Microsoft is not commenting on the story, but it would make sense since an ad agency is not a great fit for Microsoft’s main Web advertising business which is in the uncomfortable position of courting rival ad agencies. A possible buyer is the French marketing company Publicis Groupe which just last Thursday announced a "broad strategic agreement" with Microsoft.
There had been rumors of an asset swap for Razorfish with ad giant WPP Group in August 2008, but that never panned out and now that two years have passed since the aQuantive acquisition, favorable tax treatment would make an outright sale more likely. It also does not hurt that Microsoft might get $600-$700 million back on the hefty US$6 billion they overpaid for aQuantive.
