Are there more layoffs in Microsoft's future?

One of the questions that no analyst asked directly during Microsoft's post-FY09 Q4 earnings call this week was one very much on Microsoft employees' minds: Will Microsoft cut more jobs as a way to improve its numbers for the next calendar quarter or two?

One of the questions that no analyst asked directly during Microsoft's post-FY09 Q4 earnings call this week was one very much on Microsoft employees' minds: Will Microsoft cut more jobs as a way to improve its numbers for the next calendar quarter or two?

Microsoft announced plans to cut 5,000 jobs in January and made those cuts in the first half of calendar 2009.

The closest any Wall Street analyst got to asking that question (at least that I heard) was when Brad Reback from Oppenheimer & Co. asked Microsoft Chief Financial Officer Chris Liddell about the expense side of Microsoft's equation for the rest of the year. According to a transcript of the call, Liddell responded:

"Yes, certainly for this fiscal year, I don’t see any potential for us to significantly vary from the numbers that I gave you. The only reason why it would would be something outside our control, like foreign exchange, so some of our expenses are outside the U.S., if we saw a significant change in the FX rate, then I can’t influence that. And things like some of our volume related expenses, so if we saw a really strong pick-up in some of our enterprise sales, some of our revenue driven expenses might increase.

"But in terms of things, which is the great bulk of the expenses which are totally inside our control, I don’t see any potential for us to [inaudible] this year."

That inaudible clause, according to my notes, was "I don't see any potential for us to lower our expenses for the rest of this year."

So does all that mumbo-jumbo translate to no more layoffs? Probably -- at least for the rest of this calendar year. But not definitively....

Brent Hill, an analyst with Citi Software noted that Microsoft can never say never to that question. (And CEO Steve Ballmer made that abundantly clear in a May e-mail to the troops, where he refused to rule out more cuts in the future.)

However, with that caveat, Hill added, "I don't think more layoffs are coming."

Like a number of Wall Street analysts who watch Microsoft, Hill said he believed Microsoft needed to trim its ranks to get its costs down.

"They should have taken a deeper cut than they did -- like the rest of their peer group (other tech vendors) did" Hill told me yesterday.

There's been a lot of layoff speculation on the anonymous Microsoft employee blog Mini-Microsoft, especially leading up to and right after Microsoft's dismal earnings announcement. (It's important to remember that on Mini-Microsoft, it's hard to separate informed rumors from competitors and others attempting to whip Microsoft employees into a frenzy.)

There have been some fairly credible rumors I've heard about the Windows client unit shedding more employees now that Windows 7 has been released to manufacturing. Traditionally, at the end of each Windows cycle, some employees decide to move to other positions inside Microsoft and/or leave the company outright before the next Windows release cycle kicks into high gear.

I asked Microsoft for comment this week as to whether there will be further proactive belt-tightening  by the Windows client group -- or as Mini's author, "Who Da'Punk" calls it, being "Sinofsky'd" (a reference to Windows President Steven Sinofsky's house-cleaning and reorg'ing of the Windows unit when he became the new sherriff a few years ago).

I was told that there was nothing in the works as of this week. A spokesperson said that Microsoft did make a couple of organizational tweaks inside Windows when the company announced the promotion of Sinofsky to president, but that nothing more was happening at the moment.

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