01.26.09
Cringely Says Microsoft Should Fire 50,000 Employees; More Dead Teams Surface
IN OUR PREVIOUS ANALYSES of Microsoft’s tough situation [1, 2, 3, 4, 5] we supported the allegation that Microsoft is in effect firing a lot more than just 5,000 people. The company has a handle on its peripheral workforce whose contracts it need not renew.
Pseudonym Cringely, in another one of his spectacular stabs at the subject, points out that another methodology for quietly firing people may be the company’s routine of discarding the least-performing tier of employees, some of whom may leave voluntarily. In Microsoft’s HR department, significant reductions have already been reported, which suggests that new hires will be left at the backburners. Here are some other portions worth quoting:
Next let’s consider how big a layoff this really is – 1400 people right away and up to 5000 by sometime in 2010. Microsoft has, depending on how you count it, about 100,000 employees. If the average time in service is 10 years that implies that 10 percent of the Microsoft workforce leaves every year, which feels about right. That’s 10,000 folks leaving of their own accord EVERY YEAR. So what does this layoff mean, anyway? “Over the next two years we’ll be eliminating 5000 positions.” It means nothing.
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So unlike every other public company, Microsoft traditionally manages its earnings not by cutting expenses but by increasing spending. It’s a legacy technique invented years ago by legendary CFO Frank Gaudette and embraced by Bill Gates and Jon Shirley because it accomplished the task of meeting Wall Street expectations, allowed the company to hide spectacular true profit margins, while still generally keeping anti-trust officials off Microsoft’s back.
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Instead of 5000 positions, the company should drop 50,000. It should decide what businesses it is in and close or sell the rest. It should be a lot better than it is at running its true core – the muscle that’s been hiding beneath all that fat.
Yesterday we wrote about Microsoft projects, division, services or products that had been rendered dead. Here is another one which was caught by Mary Jo Foley.
It looks like Microsoft’s Global Foundation Services (GFS) team is, indeed, among those taking a hit.
This won’t be formally announced until later in the week. They must be working out a way to perfume, embellish pr beautify it somehow. █
“Microsoft’s perspective is best reflected by Bob Herbold, Chief Operating Officer, to whom the CFO reports. Bob very sincerely replied, “Bill, everyone is doing it.” My response was that Microsoft is a leader and that others are now seeking to emulate these fraudulent practices they have legitimized. Naturally Bob was not pleased by this perspective and that was our final conversation.”
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