Wendy Waters
by Wendy Waters
Mon Jan 26th 2009 at 7:57am UTC

What’s Up at Microsoft?

Microsoft laid off 1,400 workers on Friday, en route to as many as 5,000 – the first layoffs ever at the company.

Less than two years ago, Microsoft couldn’t find enough qualified software engineers in the United States that they were begging for H1-B Visas to import them. They also opened up a development center in Richmond BC, just outside of Vancouver (and only two hours drive from Redmond, WA) to take advantage of more skilled-immigrant-friendly Canadian government policies.

What’s going on? Anyone know? Have thoughts?

Is Microsoft really struggling enough to shed talent so fiercely fought for?

Is America now over-supplied with software developer talent?

Or is Microsoft taking advantage of a crisis to shed unproductive workers or corporate divisions?

Steve Ballmer does mention that Microsoft expects to hire 2,000 – 3,000 people over the next year or so (suggesting things are not that bad).

18 Responses to “What’s Up at Microsoft?”

  1. hayden fisher Says:

    Given the strong quarterly reports of Apple, Google and IBM last week, Balmer’s effort to excuse MS’s rotten performance on the market is further evidence of his incompetence. Did you also notice that sales of the Zune (to the extent there were any in the first place) were down over 50% year-to-year in December. Etc., etc.

    Just call a spade a spade. MS is a dying dinosaur. Its Office suite products will be the only ones to perhaps survive. And I say perhaps, because Apple’s Keynote blows away power-point and Excel and Word are both vulnerable if a competitor could overcome the learning curve that would be embarked upon concomitant with a switch to a new format by the business world. But Windows has always been MS’s mainstay and that market will soon be dead. Apple’s Operating System is awesome and continues to get better. Linux-run operating systems are already plenty abound in netbooks and, soon, PC makers will have to begin re-thinking their commitment to solely Windows-driven PC’s. That will signal the end-game for MS.

    Bottom line, MS’s products have never been first rate. It won its court case with Apple in the early 90’s, launched the Windows 95 operating system that ripped-off Apple technology and since then has depended upon overwhelming market share and product familiarity to survive. No innovation. No new products. Apple and Google are so far ahead in the technology front, MS can never catch-up.

  2. Brock Says:

    I think profitability is more of a priority than talent management at the moment. Yes every high-tech company has a dearth of talented people and yes Microsoft is no exception. The problem Microsoft has is keeping all of its multivarious business lines profitable. Headcount is the largest overhead at MS. If you are an A++ programmer at MS, chances are high you would be last to go – but if you are a B+ programmer working on a product that has failed to gain market traction or is secondary in importance to overall corporate strategy – like the MS flight simulator product they recently axed – then yes your job might be on the line in lean times.

  3. Matt L. Says:

    Well, I agree with Hayden on one thing: Ballmer’s a poor CEO. But it’s easy to be tempted to read too much into this announcement.

    Microsoft still made a $4.2 billion profit in the quarter; the problem was that the street was expecting $4.7 billion. That’s a problem many companies would love to have. In my view, Microsoft takes its duty to meet its quarterly numbers far too seriously. A few years ago they cut a bunch of employee perks (including the now-infamous attempt to eliminate the locker room “towel service”) and ended up destroying far more employee goodwill than they created stock value. In this case, it seems like they’d be wise to keep investing in aggressive product development when so many other companies just can’t afford to.

    They may be taking the opportunity to trim contractor ranks, which makes sense (the higher rates paid to contractors just can’t be justified in this environment). As for full-time employees, they’d typically be given a chance to apply for other open jobs within the company, so the assumption would be that the best won’t be lost. But that’s hard when there are so many people going in a short period of time. And when I think of the costs of recruiting those people in the first place (especially if there were visas involved), the move seems even more short-sighted.

  4. Buzzcut Says:

    I’m a big believer in the Jack Welch/ Larry Bossidy “get rid of the deadwood” system.

    At GE and Allied, the bottom 5 or 10% of employees would get canned EVERY YEAR.

    That is very hard to do. A company has to be very disciplined to pull that off.

    But slowdowns do present the opportunity to get rid of low performers.

    And, yes, there are low performing H1B’s!

    Also, the one consistant thing we’ve seen during this slowdown is that market after market was overbuilt. Homebuilding, finance, casual dining, etc. I’m sure the markets Microsoft sells into are no different. PC’s, for sure, were oversold during the era of cheap credit.

    I myself have a 6 year old system, running XP, that is not getting replaced anytime soon. The era of the 3 year replacement cycle is over.

  5. Wendy Says:

    Great comments. I agree with Matt that it’s key to keep in mind that Microsoft was still a very profitable entity in Q4. These layoffs are thus not being done in desperation.

    But, I also agree that it’s a company with too many product lines and a lot of products that while still widely used are becoming dated. This slow down would be a good time for some internal soul searching including on which divisions and teams are no longer really needed.

    Plus, as BUzzcut touches on, any company as big as Microsoft that has never had to do some widespread layoffs probably has a number of people within its ranks who are not that productive (anymore).

  6. Michael Wells Says:

    I’d guess that the layoffs aren’t because of financial problems, but anticipation of tougher times ahead. With Intel, HP, Dell, etc. and others cutting back, MS can anticipate fewer sales on new machines. And many businesses and individuals will decide to forgo new software upgrades this year. Microsoft may anticipate the next couple of years profits being micro and soft.

  7. Mike L Says:

    “At GE and Allied, the bottom 5 or 10% of employees would get canned EVERY YEAR.”
    This works for soccer leagues (relegation), but I would hate to work in that environment. Everyone would be focused on “making the numbers” and doing other crazy end-of-year shenanigans. “Hey, boss, do you need a caddy for your next round of golf?”

  8. hayden fisher Says:

    I guess I’m the only one who think MS is in trouble…. we’ll see.

  9. hayden fisher Says:

    Here’s a great piece from a Linux leader on MS’s woes: http://linuxdevices.com/articles/AT8154244993.html

    MS’s problem is that the slippery slope nose-dives fast, it will only take a few Linux-driven machines being sold coupled with Apple’s quickly advancing market-share to do-in MS. Name one new innovative product coming out of MS? It’s humorous that MS and Detroit teamed-up with the Microsoft Sync system they paraded on t.v. last year– here we have the worst in American product-design packaged together and we wonder why they need a bailout. Windows Vista? Not. MS Zune? Not. X-Box? –they actually stole that technology from Apple to, the old Apple operating system, but it’s now been passed by too. Outlook? Please. Windows Explorer? Garbage, even PC owners replace it with the free Firefox. Etc., etc., etc.

    MS has lots of money and plenty of time to re-structure and re-focus. But that cannot happen with Balmer at the helm.

  10. hayden fisher Says:

    …and for anyone who has further doubts, watch this hilarious clip: http://blimptv.blogspot.com/2007/11/vista-sucks.html

  11. hayden fisher Says:

    …and one more, because I cannot resist, an ad for “ZunePhone”… this one might be my favorite: http://www.youtube.com/watch?v=nRKIDdIaFyE

  12. Matt L. Says:

    Remember “nobody gets fired for buying IBM”? The same conservative, risk-averse corporate and government purchasing is what drives Microsoft’s profitability. (I believe the US government is Microsoft’s largest customer.)

    Industry “buzz” and retail trends can be early indicators of a shift, or they can be meaningless. Back in 1996, Corel was thrilled when WordPerfect for Windows outsold Word for Windows at retail. Looking back, it’s obvious they were fighting and winning the wrong battle.

  13. Wendy Says:

    Great discussion. Thanks for all your ideas and links. It’s still hard to think about betting against Microsoft (few people have done well doing that in the past). But, then again, that was Microsoft under Gates, who seems to have moved on to other interests.

    Glad I opted for XP and not Vista when I bought my lap top 2 years ago.

  14. Buzzcut Says:

    Glad I opted for XP and not Vista when I bought my lap top 2 years ago.

    I don’t know a thing about Vista. My computers are old enough that they came with XP (one came with 98, updated with XP over 5 years ago). Work computers are XP.

    Is there anything that XP can’t do that Vista (or Apple) can?

    On the positive side for MS, it seems like netbooks largely come with XP now. That has to be an explosive market for them.

  15. hayden fisher Says:

    “Is there anything that XP can’t do…or Apple can”

    Buzzcut, you really need to spend some time on a Mac using the Apple operating system. The differences are staggering. When I used PC’s, wasted at least an hour a day complaining, re-booting, calling our IT techie, etc. I’ve been using macs in my new business for 10 months and I’ve never had one of those days, nor the need even have the number for let alone call an IT techie. The products just work. Wonderfully intuitive. Brilliantly designed. No viruses. No spyware. No worrying about opening attachments. No lost work product. Etc., etc.

    Microsoft is getting killed in the netbook market. And here’s the problem. PC’s cannot compete with Apple on the product quality level and can no longer compete with netbooks on cost. That’s a recipe for disaster. Those Windows’ licensing fees still drive MS’s business model. If that revenue stream begins to dry-up, the company could collapse. Which is not to say that a smaller, leaner MS could not still sell products like the Office suite, probably even better versions; but it is to say that MS’s days as king of the hill will be coming to a screeching halt. MS could very easily become a very small player in the market.

  16. Wendy Says:

    Hmmm… maybe I should try a MAC. Although I like my Toshiba laptop, I do end up in technical difficulties at least twice a month that take me a couple hours to resolve, usually with the help of an outsourced tech support company.

    Or maybe I need a netbook. All I seem to do is use the Office Suite and various web-based applications from blogs to corporate citrix e-mail.

  17. hayden fisher Says:

    Wendy, you should definitely try a MAC. You will be amazed by the difference. I’ve played with a netbook but never owned one. But it’s amazing how they’ve impacted the PC market.

  18. Buzzcut Says:

    My parents and brother are Mac people.

    Other than the “quality”, which truthfully makes no difference to me (I’m a techie), is there anything Vista or the Mac can do that XP can’t? I take that as a no.

    Regarding netbooks, the latest numbers I’ve seen are that 90% of them come with XP, at a cost of $35 a copy. This is a huge source of growth for Microsoft (although some may argue that, if netbooks are replacing real laptops, it is a net loss for Microsoft).

    Linux was the default OS when netbooks were introduced, but it is the availability of XP that started to really drive sales.

    There’s actually a new kind of “sub-netbook” out there, just starting to hit the US from Canton. They’re under $200, they use a Chinese knockoff of the old MIPS processor. They run some kind of Linux. They allegedly wholesale for $89 in Canton.

    Here’s one place to get one. I’m intrigued, I may pick one up to play with.