Microsoft Lost Its Focus and 3,000 More of Its Workers Lost Jobs

On May 5, Microsoft followed through on its January promise to eliminate 5,000 jobs, announcing a round of 3,000 job cuts to employees. Microsoft said the job cuts were divided evenly between U.S. and international workers and reportedly, the eliminated positions were mostly in sales, marketing and support.

Back on January 22, Microsoft said it would lay off up to 5,000 employees over the next 18 months. On that day, it made 1,400 job cuts. This second wave brings Microsoft close to that goal of 5,000. In an e-mail to the company, CEO Steve Ballmer does not rule out more cuts, writing that “we are mostly but not all done with the planned 5,000 job eliminations by June 2010.”

One one hand, kudos to Microsoft for not wasting too much time with the layoffs. It has been three months and the job cut goal has been almost reached. That 18-month timeframe from the original announcement seemed way too long. It would have been a year and half of worker anxiety, cynicism and decreasing morale.

So even though Ballmer did leave the door open for more layoffs in his e-mail, Microsoft handled most of the pain during three months. Not bad.

But that sure don’t make it right.

Look, Microsoft is no different from any of the many giant tech companies like Dell, Motorola and Sun (recently acquired by Oracle) that are laying off thousands these days. Microsoft’s last two quarters have yielded historically bad revenue results in a historically grim economy. And Microsoft is only following through on a previous layoff announcement.

But not all of Microsoft’s problems can be blamed on the recession.

Microsoft’s hubris and its tendency to be reactive as it competes with nearly everyone has hurt the company. It still has its cash cows, Windows and Office, but it is struggling to adapt as desktop applications move to the Web. The Windows group has seen quarterly sales drops and continues to get hammered by the rise of lower-priced netbooks, most of which run Windows XP but do not bring in much money.

Microsoft may be a giant and is flush with cash, but right now in many ways it is a follower, not an innovator. It trails way behind Google in search and Web applications, RIM and Apple in mobile computing and VMware in virtualization (with Microsoft running about 18 months behind VMware in terms of virtualization management features for enterprises.)

Microsoft will remain a powerful and versatile company, but it is also the victim of its own over-reaching, over-hiring and poor planning. And who pays the price? Some hard-working employees.

Paradoxically, Microsoft is also saying it is still committed to hiring up to 3,000 people between now and mid-2010 as it figures out which departments are bloated and which ones need a lifeline.

The reasoning for this firing and hiring scenario is, of course, the economic downturn. But I think another reason is that Microsoft is still scrambling to figure out where resources and people should be allocated — and it’s getting a little late for that kind of hazy thinking.

From where I stand, the lifeline departments are search, Web applications and mobile. These are the areas where Microsoft stands to become irrelevant if it doesn’t get focused.

Here’s hoping it doesn’t take another round of layoffs to find that focus.

I have included Microsoft CEO Steve Ballmer’s May 5 memo to all Microsoft employees:

From: Steve Ballmer

Sent: Tuesday, May 05, 2009

To: Microsoft – All Employees

Subject: Update: Realigning Resources and Reducing Costs

In January, in response to the global economic downturn, I announced our plan to adjust the company’s cost structure through spending reductions and job eliminations. Today, we are implementing the second phase of this plan.

This is difficult news to share. Because our success at Microsoft has always been the direct result of the talent, hard work, and commitment of our people, eliminating positions is hard.

Today’s action includes positions in the United States and in a number of countries around the world. In the U.S., affected employees will be notified directly by their managers today. In other countries, local leadership teams will provide more specific information about the impact to their organizations.

With this announcement, we are mostly but not all done with the planned 5,000 job eliminations by June 2010. We are moving quickly to reach this target in response to consistent feedback from our people and business groups that it’s important to make decisions and reduce uncertainty for employees as quickly as possible, and so that organizations can concentrate their efforts and resources on strategic objectives.

As we move forward, we will continue to closely monitor the impact of the economic downturn on the company and if necessary, take further actions on our cost structure including additional job eliminations.

For those of you directly affected by today’s announcement, I want to thank you for your contribution to Microsoft and assure you that we will continue to provide support as we did during the previous job eliminations.

And for everyone across the company, I want to reemphasize how much I appreciate the way you have pulled together to help the company respond to this difficult economic environment. There’s no doubt that these are very challenging times. But together, we are making the right choices to ensure that we will continue to deliver great products and position ourselves for strong future growth and profitability.

Thank you for your continued hard work, commitment, and focus.

Steve