After much, much, much speculation, Microsoft let the cat out of the bag today: due to weak results, Microsoft is going to cut 5000 jobs. Those 5000 jobs will disappear over the course of 18 months, with 1400 jobs being cut immediately. Quarterly results, as well as the cost-cutting measures, were made known in a press release today.
The company has suffered under the economic stagnation, which hit the overall computer industry pretty hard. Still, the company posted a profit of 16.63 billion USD for the second quarter (ended 31st December), which is up just 2% from the same period last year, and 500 million USD below October 2008 forecasts. Windows unit sales dropped 8%, mostly due to the economic downturn and the shift towards netbooks (from which Microsoft profits less). However, the server and XBox divisions showed profits, going up 15% and 3%, respectively.
As a consequence, the Redmond software giant is forced to cut jobs. Over the course of the coming 18 months, 5000 jobs will be cut, with 1400 being cut instantly. They will also delay salary increases and save money by other means. “While we are not immune to the effects of the economy, I am confident in the strength of our product portfolio and soundness of our approach,” Ballmer says in the press release, “We will continue to manage expenses and invest in long-term opportunities to deliver value to customers and shareholders, and we will emerge an even stronger industry leader than we are today.”
The company will detail the results during a conference call later today.
Sad for the people loosing their jobs. But hopefully some good will come out of it, and by that I mean better products from Microsoft. It sounds like Windows 7 is a step in the right direction.
the next right step is to buy SCO or QNX port their driver infrastructure and .net to the OS and sell an Open Source Unix product .
Well…. let’s see how well it was for the FLOSS companies like RH and such. When are their reports coming out?
Come, now … how could any company that sells Linux services or support ever be affected by a poor economy? Especially in 2009, which will, without a doubt, be the “Year of the Linux Desktop.” Bet on it!
Easily, when companies decide to cut costs by cutting services. Keep in mind that purchase of services is much different expense than purchase of a product (i.e. a desktop that has an OEM license with it). Often service and support contracts are not included in the asset table, but rather as a continuing cost. Companies such as RH and Novell may have to adjust to new strategies should the economy continue to sink.
I believe your sarcasm meter needs adjusting
Uhmm…what? I thought it was back in ’99? Well wait no, I did go Mac for a couple years so…maybe it was ’03?
Red Hat announced it’s quarterly results recently.
http://news.cnet.com/8301-13505_3-10128256-16.html
“To put this in perspective, last quarter Red Hat grew 29 percent over its first-quarter revenues, while in third-quarter 2007 it grew revenues year over year by 28 percent.
In other words, the third fiscal quarter of 2008 (which ended November 30) demonstrated another solid performance by Red Hat,”
Ok, maybe they need to cut jobs. But how many companies in the world can pretend to have the same margins as Microsoft? I think this economic stagnation is just a good opportunity for companies to cut costs and improve their already huge margins. A 16.63 billion USD profit for a quarter? And they are cutting more than 5% of their employees? I’m probably naive, but I don’t find that fair for those who are going to lose their job.
It’s $16.63 billion total revenue for the latest quarter. The net profit is $4.17 billion, which gives a still-impressive net profit margin of 25% (down from 29% for the previous quarter).
To give an idea of how Microsoft’s net profit margin of 29% compares elsewhere in the computer industry last quarter (figures are from Google):
Dell: 4.8%
Apple: 14.4%
HP: 6.3%
IBM: 11.2%
Even though everyone is feeling the pinch of the global economy, the sky is hardly falling for Microsoft, and a layoff at this point just doesn’t seem justified.
Totally agree,
It’s pretty appalling that companies are allowed to do this.
It’s like the Commonwealth Bank in Aus not so long ago, made a record $2.6bn and sacked 1500 people. Governments need to regulate this kind of thing.
It’s fair enough if companies are strapped and have to let people go, but this kind of thing is ridiculous.
If you’re redundant you’re redundant. Why should a company who no longer needs your services be forced to keep you on because once upon a time they needed you.
Keep in mind when times are good employees can jump around from job to job with no loyalty either in order to maximise their take home. So it seems fairly equitable to me. When you don’t need their job anymore you leave, when they don’t need your services they give you a severance package and off you go.
Please no tyrannical regulation.
That’s a pretty cynical view. Not all legislation of this kind has to be tyrannical.
I guess what I’m trying to say is that I would enjoy some legislation to force corporations to do what they should automatically do out of a sense of decency.
I also believe it’s in their own self interest. Corporations take a narrow share-holder centred view, in fact they’re required to take that view by law! But none of them ever actually think of the big picture.
Those 5000 people who are now out of work (and in this climate are likely to stay out of work) will join the thousands (millions?) of other people who are also jobless and therefore not spending. Not spending on Microsoft products, not spending full stop.
This just exacerbates the problem and ensures that this economic crises will be prolonged. Why is this a good thing when most of the corporations could have easily kept them employed, and helped bring the economy back online?
Edited 2009-01-23 23:17 UTC
Companies are not laying off people because they do not want to see them around any more. Sometimes they do when particular individual is a problem person. But, when some company lays off 5000 of them that means that they canceled some products, because those products are no profitable any more.
There could not exist any regulation that would have prevented that. Those positions are not vacated, they simply ceased to exist. Nobody can’t be forced to do particular business against their will, except under some extreme conditions, like during the war.
It will be interesting to see what elements of Microsoft offering are to be discontinued.
The first to go is Performancepoint planning server, which is pissing off a lot of customers/partners. they invested lots of money into the product, and now that implementations are halfway, msft tells them they invested in a dead end. Some startups even betted their whole existence on the product…
I hope that some of those that are losing their jobs are those brillant marketing folks that brought us those gonzo commercials with Seinfeld and Gates.
Though I could agree with you, think on their family economy… losing the job is not funny when you have children to sustain..
well they can try to work for NBC. They are always looking for new shows that aren’t funny or interesting.
Guess they better have their “Will create inane marketing campaigns for food” signs ready.
Too bad they can’t get rid of Ballmer, since they’re making job cuts …
Those results are looking back. And compared to some, like Intel’s, they’re not bad either even though it’s sad that many folks will be losing their jobs. But looking forward is rather more chilling:
I wonder if they think the Western economies are about to go over a cliff?
How will microsoft enforce there none compete clause.
You cant stop a guy from making a living.
I know a few who been gotten rid of who were win nt 4.0 kernel programmers
One gentlemen was forced to take early retirement.
So microsoft cant stop him from earning a living.
Almost all non compete clauses are actually illegal as written. Unfortunately many corporate lawyers don’t understand this. The point you make about being able to make a living is exactly true and law in most if not all states.
To make a valid non compete the company has to reimburse you handsomely to basically make it so you don’t have to work. IE: make you independently wealthy.
That being said, I’m not sure I’ve ever heard about layoffs at Microsoft before. To be honest, when the economy is down like this its a good excuse for companies to “trim the fat” without having to worry so much about law suits, even if the company doesn’t really need to get rid of people. I’m sure 5000 is really a small drop in the bucket.
For a company that have $50 billion in the bank, that does over $50 billion in profit a year, to lay off employees is a big shame.
As always, the workers pay for the share holders.
Where is this society going? The share holders are supposed to take the risk and responsibility in exchange for the huge profits they are pumping on the back of the workers.
So this year is tough? They didn’t increase their profit by 30% but only 10% year over year? Too bad they will only get $50 billion instead of the $100 billions they expected? Come on! The workers made the software, the workers marketed the software, the workers sold the software and the workers are layed off when your profits are not as high as you expected?
How can they look at their face in the mirror they bought several thousands of dollars and not see they are assholes? How can they go buy their 12th Ferrari and fire 5000 people? Those guys should really be ashamed of themselves.
Edited 2009-01-22 18:30 UTC
yeah, but it is the fault of the engineers and computer scientists.
Do we form cooperative companies?
Do we form professional association?
Do we unionize?
No, we buy into the corporate ventual capital, share holder model. As they say, us workers didn’t have a problem taking their money in the beginning.
Even when we are successful (Bill Gates) or any number of other rich people. Do we use that money to create our own employee owned companies… nope. Not doing that either.
The only shame belongs on us engineers/programmers for not empowering ourselves.
Yeah, sure! You’ve clearly got no clue how unions end up causing more harm on both sides than good:
1. At first, perhaps, unions seem to benefit the workers by making better working conditions. Well, that’s all fine and well where there’s safety problems and human rights violations. But honestly, if you’ve ever been inside Microsoft’s hallowed halls, you’d have a heck of a time attempting to justify that.
2. Longer term, a union makes it nearly impossible for those that are slackers to get fired once they’ve been hired.
3. And of course, don’t forget this: unions inevitably cost the workers more over time because they demand union dues, and also, once a shop has a union, you generally can’t work there unless you join their union, and unions (outside of safety/rights violations) rarely have much value to workers, especially ambitious and competent ones.
4. Very long term, when unions out-live their reason to exist and don’t disband (most never disband), they end up causing costs to go so high that employers can’t afford to keep workers, and things get too expensive, the company goes out of business, and no work is available.
Look how well things have worked for the US auto companies for an example. Oh, there have been unionized engineering shops, but… generally that doesn’t work out too well long-term. International Harvester, have you by chance ever heard of them???
and out of 3 suggestions, you decide to rant on one missing the complete point of the post. I’m no union supporter.
I am pretty sure I spent far more time talking about cooperative companies than on unions.
I’d much rather see engineer/scientists focus on employee owned companies and professional associations. The whole point is to empower yourself instead of simply ranting and whining about shareholders.
Here’s a hint… do you know why lawyers, accountants… tend to run their own firms instead of simply being worker bees?
Edited 2009-01-22 23:45 UTC
Funny you mention doctors, lawyers and accountants as comparisons for cooperative practices to that of software engineering, because there are major differences that make them an apples/oranges comparison:
1. Only in the most unusually complicated cases is there much or any teamwork of note between them where they work together closely, because they normally don’t need to.
2. Only in rare cases do any of them develop new products: if you’re creating new things in accounting, prison time often results, most doctor’s practices don’t engage in much/any real research, and it is government that enacts laws.
3. All 3 of your examples have little/none in the way of long-term project work of a highly unpredictable nature in terms of expense, manpower requirements, or production schedules, largely since very little is truly creative, and is very routine and constrained by law: software development in most cases is creative, often difficult to schedule out creativity and testing and bug fixing.
4. All 3 of your examples have pure service as a product, and none of them have their underlying knowledge/tech base change incredibly fast under them, though it’s be nice if more doctors kept up better. Competent doctors, lawyers and accountants have a surprisingly consistent demand for their services, regardless of the economy, because people can’t do a lot of the things they can do, and (more importantly) they can’t avoid using their services during bad times and make do, without falling prey to long-term negative consequences, while people often can use the same old hardware/software for many years without upgrading. How many people feels need to upgrade to Vista???
5. Lawyers, doctors and accountants have something that is not nearly as speculative for the needs/wants of their services because of the above points, while the closest comparison of software engineering/development consultants have a much increased chance potential customers will choose to keep their old systems when they decide they have something that works well enough when the budget is tight, or just even if the budget is fat, but their current software/hardware is a sufficiently known and efficient solution for their needs. Perhaps you’re unaware of just how many mainframes from the 60’s, or at least the software written for them are still in production use: why do you think there was such a huge Y2K scare???
Speculative software product creation (not doing development for a fixed contract) is very financially risky with the amount of resources versus guaranteed payback, especially when you have to factor in marketing costs. Software can cost many manyears of labor to develop, and even if “perfect” can be knocked out by something marketed better, or people won’t switch from something else due to lock-in. Is Windows better than everything else available? For every commercial success, many never break even: not even Microsoft is immune from this reality! Most people only are aware of the commercially successful software: what percentage of the general population has even heard of BeOS?
Because of all these factors, very few (statistically) software firms can survive as cooperative businesses developing speculative products unless they start with a large pile of cash to ride out the lean times until they produce enough hits to overall be profitable.
Summary: your examples are less than valid in the real world, and reek of inexperience within it.
You could argue that all that control results in a lot of creativity to be required
1. Union would have tried to keep the 5000 jobs , by pressuring Microsoft , asking the entire group to walk and ask for lower pay for those worker instead of firing.
2. That’s a usual bulshit and lies , slacker are easily fired in Unions. It’s in bad company that slacker are hard to fire , also most worker have no idea what other worker work result are , the big slacker are usually thingking they are the best workers.
3. Actually in reality union workers have more benefits and more pay over time compared to non unionized worker , the only competent and ambitious that make more usually change side to be their own boss or change job to a real paying profession. one union group , people like you tend to forget , are asssociation and profession like doctors , plumber and other associated worker professions.
4. The real culprit to blame for large job loss is globalization , not union per say , the boss have gone global and union have stayed local. when they can replace you by 100 people that cost them half your salary over all and it cost them less to ship the product half the planet away then do it locally , they do the maths and cut jobs to increae profit , usually loosing in the long term because you can’t replace quality worker with experience over night unless you move them around.
The US auto company #1 problem is they are trying to sale 70’s and 80’s style car , at twice the price of their competitor in the name of extreme profit when their counter part are offering car of the end of the 90’s for hlaf their price , The management are to blame for the huge excess of inventory , that cost hundred if not thousand of millions per day and excess of sales dealership , that are costing them more then the actual unionized worker on the line ( do a research on port storage vs buying a lot inside a small city ).
The funny thing is other worker cost more then US workers , if you add all their benefits , but they also get retrained on the job , and work longuer hours , full meal compensatiuon and live in country where free healthcare are the norm , a lot of them also get residence on the comapny dime and extra activity too , so they are not gouged by inssurance and failing medical system and greedy landlord in almost empty city that have US citizen pay three time as much as everyone else.
US auto company have been around longuer then their counter parts , other companies around the world also used to close more often due to past US higgher quality and service in vehicules , because after all they are automakers , not money makers. Beside most US auto makers don’t have that much unions this days as they let in a lot of worldwide subcontractor on many parts , assembled in the US is not the same thing as entirely built in the US.
– Tesla ( working electric car ) #1 problem is production , both in number and cost and training and financing , the worker could always setup a production shop and offer there service , the Union could lend them the starting money.
– Microsoft as a tendancy to hire the best , in case you don’t know Apple and GNU/Linux company could use them if they show their worth.
Most company fail due to management and shareholders lack of oversight over management and there undue importance on them , when your company use to make 50 million a year in profit and now you have a ceo who make 45 million based on past result , that no longuer apply in the last year year and sales are in decline to low 10 of million , the problem is the CEO not the worker who do the job.
– Statistic show non unionized company close million more time then unionized one.
– Microsoft history show it as created a lot of millionaire and even a couple billionaire employee , this days they make record profits but they don’t create as much rich people …
One can even draw a direct parralel betwen the reason why both US based company in two different industry are laying off people :
Most people globally are starting to buy other cheaper , better , faster , safer prodcuts from their competition.
There is nothing wrong with Unions protecting workers from unfairness. Unions do however get in the way of business realities and they also protect the useless POS workers who should get fired. If I was a union member and my co-worker was not coming to work and when at work, not working.. I would not support the Union’s efforts to keep him… It gives me more work and less pay for it.
What’s wrong is your lack of knowledge about union. But your knowledge of the lies put against them.
Not in reality. There are more non unionized company that close , everyday , then unionized ones. Unionized company closing are a rarity , in fact. But they got well funded PR machine and extremely well funded lobby working against them , who tell lies.
No they don’t , In reality unions push for POS worker to get fired , often more then not , the POS are relatives with someone backing them in management or they are specialist that would cost more to replace as those POS accept to work at 25%-50% what there replacement would cost , again it’s management who refuse to fire them.
Also as I pointed out most people who call other’s POS have no idea of what the other productivity or speciality to be. Beside humans do get sick , we are not machines. It usually cost 15k to retrain someone new and take 3-6 month to have them work at full capacity and most of the time the replacement is even worst then the so called POS they replaced.
Since when are union in charge of hiring , schedules , work load and pay ?
1. If someone call in sick it’s your managers job to replace him. With a temp or by hiring part time or full time.
2. The schedules for worker are made by management.
3. Since when union tell you what to do and do more ? If you accept to replace another worker and do is job without compensation it was your decision.
4. Union are not the one who decide what management or the company pay it’s employee’s , for x job.
Company always close and people loose there jobs because the management decided to do so.
Most of the trouble I have witnessed comes from the Service unions, not the skilled labor unions.
Please please do not take offense, but I believe you do not get unions, or the way the economy works in general.
Those you call POS (you mean slackers right?) are not eating into your pay at all. Actually maybe they eat $1 out of your salary. Those who really eat on your salaries are the share holders. They are doing NOTHING, NOTHING AT ALL, they just happen to be rich. And they don’t take $1 from your salary, they take 2 thirds of it. When you work, your create production which translates into money. That money you create is then shared with your share holders. They take 2/3 of it, they reinvest 1/6 of it and they give you back 1/6 of the money YOU created. You share that money with the POS and and maybe you only have 0.99/6 of your salary, but don’t make a mistake, the POS is not the one eating your lunch!
Edited 2009-01-24 13:37 UTC
I think the U.S is a very bad example of how unions work. Just because you guys failed to make them work doesn’t mean they don’t work in some other place of the world.
But perhaps software engineering isn’t a profession in dire need of unions…
Wrong, their $50 billion dropped to just below $20 billion.
http://finance.yahoo.com/q/bs?s=MSFT
All right, I didn’t even check. Only $20 billion? Oh My God! We should send donations to those poor share holders… Please, someone give them another $10 or $20 billions to survive! Times are really tough for them!
half of that would be a very good salary for 5000 workers for 40 full years and they would still have a lot remaining. Let me repeat that slowly: They could pay 40 full years (very good pay) with half the money they have in the bank and they would still get their full revenues as profits. They still get over $10 billion a year of profits. They wouldn’t even have to cancel their plan to buy a new jet plane and they still save a lot of billions in the bank. Even with a lot of creativity they could probably not spend all the money they would have, even if they kept the 5000 employees. They don’t have the time to spend all their money, despite doing that all day. They could hire 5000 more people and they would still have more money than they can spend.
Remember most of these people do nothing productive at all. They have a lot of money and spend it all day buying jets and ferraris. Tell me more about slackers please.
On the other hand, the 5000 people they fired spend their money in shops. They work, they spend. This is how the economy works. Even the worst slacker in the company do more than most share holders and probably spend much less.
No worker, no people in shops, no economy. Only parasites with jets and ferraris. Continue that way and one of these days, no one will be manufacturing even your ferraris anymore.
You’ve not ever been involved in the realities of any business, period, when it comes to the realities of running it, and you’ve also got no knowledge of what software engineers are paid, either on average or in localities.
1. Average starting salaries for noob engineers is > than the $50k within the US, for just the stated salaries: remember this important point for later. If you load up on Indian workers in India, I suspect you can pay less.
2. Curiously enough, most large software firms that develop broad market software tend to be located in areas with higher living costs: the Seattle area is definitely one of them, I know from living there for 4 years after moving from Indianapolis, which has neither large successful software companies, nor a high cost of living (it is actually below average by quite a bit).
3. At least in the US, employers are legally required to pay for unemployment insurance, which is not reflected in paychecks. In some states, they’re also required to provide medical insurance, though most states that’s not true. However, unless they paid all people as independent contractors and paid them very well, they couldn’t compete with other employers to find workers, because their name isn’t enough to guarantee much. Many countries have higher requirements than the US. You should lookup the cost of a medical insurance policy from Aetna, Blue Cross & Blue Shield, and other big ones, first for single employees without partners or kids, and then price with them. I think you’d be shocked how much employers pay for decent insurance! I’ve had to use COBRA several times, so I’m very aware.
4. In the US, employers aren’t legally required to provide any retirement benefits, though some countries might: this also isn’t counted in the standard stated salary as part of what you were referring to. From the point of wanting to attract and retain workers, they can’t afford not to offer them. This also costs money, often a meaningful additional amount.
5. It is increasingly common for companies to grant stock options, which also cost money, to attract and retain workers.
6. Very few companies have no marketing costs. ’nuff said.
7. Regardless of whether buildings are leased or owned, they can’t quickly unload them when things get tight, and buildings and their utilities and care cost real money, and for the same amount of space, tend to cost more than residential space.
8. Companies need to pay local and federal taxes, and a lot of localities charge enough taxes to businesses that makes their budgets work, though if companies can, they negotiate breaks, often attached to guarantees of employing a certain number of local workers for some period of time at some average wage.
9. If there’s a single company that only ever employs noobs, it’d be an interesting business study, with all employees being forced to leave or choosing to leave after a year or two of experience. In practice, there’s almost always more expensive and more experienced developers employed alongside younger ones, along with project managers.
10. Overall inflation in the US has averaged at least 3% for several decades, and often much worse in other parts of the world. At that rate, $50K 20 years from now is likely to be below minimum wage in Washington state, as it is already >$16k for a full-time hourly wage now. It doesn’t pay to make such budgets that far in the future:)
(Hey, it goes all the way up to 11!)
11. No large software company is only software developers/engineers, and many of the other employees are more expensive, and very few are less expensive.
I’m willing to bet I left out expense items in this list :p Like… retraining/educational reimbursement…
I have been involved in the realities of the biggest businesses, not your local 100 man software company. I have been working in several big business for the director board, notably in a big bank that make more than $50 billions a year. Anyway that doesn’t matter at all.
I suspect not all 5000 workers they are going to lay off are noob engineers and not all are from the US. Maybe half of them are in the US and maybe 1000 of them are software engineers.
Most large software firm are located everywhere in the world. Microsoft certainly has offices everywhere in the world.
If that cost that much, how come they still give about $10 billions a year to their share holders?
It doesn’t matter at all how an employee cost and all the bla bla bla. The fact is there: they make $10 billion in profit a year on the back of the workers.
And at the same time, $10 billions grow by more than 10% a year by themselves, mainly on the back of the workers.
You can add up all the expenses they spend, they still make about $10 billions a year in profit that they don’t spend on workers.
Reading your post, I was ready to send them a donation to pay their employees, but I checked my bank account and theirs.
Edited 2009-01-26 15:30 UTC
That an help reactos with its kernel.
Im sure reactos would give a kernel programmer
from ms a lead role.
He could say im doing this for free.
One way of getting back at ms.
And as long as that engineer doesn’t have stolen copies of the actual MS code base he can’t be touched legally.
But I very seriously doubt MS fired their competent people. It’s not likely there’s anyone of this calibre in that group of 5000
Hmmm….
Well – having some looks at corporations that do some “trimming down” it is most times the management that keeps their jobs, while the real workers and innovators are been fired.
A lot of company’s are completely “managed” into destruction that way. I don’t see Microsoft go down overnight, but I am not so sure they will not fire the valuable people and keep the useless “managers”. Most managers I know are good in keeping their self “important” and blame everything on the workers that where not able to get the “target”. Most times that target is totally unrealistic, but those managers will feel themselves real “VIP’s” (until the bubble burst – witch is the sign to fire some more workers).
So – I am not so sure the most valuable people are been kept…
Wanted to say buyers should be aware about circuit city
liquidation sale seems strange they reprice every by
raising then start back lowering
<joke>
This is just another example of Microsoft copying it’s competition.
</joke>
Even when I hate Microsoft, it is sad to hear that more people with families are going to loose their jobs.
I hope our economy recovers this year.
-2501
I doubt it will; the economy has some major structural problems and neither Clinton, Bush or Obama will do/did anything to address the core issues. Obama will tweak around the edges, just like is predecessors but never get to the root of the problem.
Edited 2009-01-23 12:41 UTC
which is?
A convoluted tax system, bloated central government where there is a tug of war between central and local (state) governments. Then there is misguided regulation and interference into the economy – such as the push for mortgages to people who quite frankly shouldn’t be within a 100km radius of a home loan.
There is a lot more, but this isn’t the forum to discuss these kids of things.
All those experienced Developers running around looking for work will kill any job prospects for a while.