Thursday, January 22, 2009

Microsoft cuts 5,000 jobs. Is that really necessary?

OK, this is not a rant against Microsoft. This is a bit of a rant against our system in general. The short term obsession of our quarterly results based financial system is going to be the death of us. Quarterly and even weekly figures may be very interesting tools for planners within a company to make micro adjustments or spot developing trends but they are NOT for use as the blunt instrument for which they are misused in our world. Just read this excerpt from today's report on the Microsoft earnings report:

Microsoft posted a profit of $4.17 billion, or 47 cents per share, in its fiscal second quarter ended December 31, versus a profit of $4.71 billion, or 50 cents, a year earlier. Analysts were looking for earnings per share of 49 cents, according to Reuters Estimates.

Revenue rose 2 percent to $16.63 billion, missing the average analyst forecast of $17.1 billion.

Microsoft's elimination of 5,000 jobs -- 1,400 of which on Thursday -- amounts to about 5 percent of its estimated 96,000 work force, the biggest reduction ever by the software maker.

What's wrong with this picture? It's not that MS profit is down. That's not really the surprise it's being painted as. It's not even that MS is unwilling to provide forward guidance, a questionable practice in many cases anyway. No, what's wrong here is that MS is going to dump 5,000 highly skilled people onto a depressed job market when it made a PROFIT OF $4.17 BILLION in the recent quarter!!!

Now, it may very well be that MS is projecting much lower revenue in the coming quarter or two. It may also be that MS is concerned about all sorts of product lines under attack. And it may even be that MS is simply using this opportunity to trim less productive staff it picked up during better times. Blah blah blah. I have to call this BS as I see it.

One of the world's strongest companies is chopping heads while making boatloads of money and sitting on the world's largest pile of cash shy of the Chinese government!

Why is this wrong? Isn't this what prudent companies are supposed to do? Would that make them welfare states if they held on to these people? I have to ask a different question: doesn't a company owe its employees anything more than a paycheck and some benefits? Doesn't a company that is wildly successful and profitable owe its employees some share of that success in the form of security? Not every MS employee gets bucket loads of options and bonuses. Many are lower level employees and many more are contract employees with few if any benefits. These employees also contribute to the success of MS. Do they deserve to be let go when the company is still printing money?

This is wrong on another, corporate governance, level as well. Firing staff over short term setbacks, when the company can clearly afford to retain them, leaves MS short of staff a couple of quarters down the road when things should pick up again. This shortsightedness can destroy a company's long term prospects, depriving it of the oxygen of good people and ideas necessary to compete.

This is not unique to Microsoft. Many a successful company has dumped employees in the midst of recession or short term transitional instability. The numbers here are just so glaring. For failing to make some analysts quarterly numbers, 1,500 hard working people are out the door! And this while the company pays a dividend of $0.13 per share.

Unless MS is bracing itself to become a much smaller company in the future, there is no need or justification for this kind of retraction. employees can be moved within the company, shifted to new projects that will prepare for the future, retrained, sent back to school for advanced degrees. There are many ways for MS to deal with this kind of market turbulence but adding 1500 workers to the unemployment lines is the worst of them. Fewer people who have the money to buy their products, fewer evangelists, fewer minds to drive the company forward. . . an impoverished country and an impoverished Microsoft.

If companies like Microsoft aren't willing to at least stay the course while making huge profits, who will invest in the future of our economy?
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