By Joe Wilcox, Betanews
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.
Copyright Betanews, Inc. 2009
