Another Microsoft layoff


I predict Microsoft will have another layoff this year.

This is either a bold or stupid thing to say, much less write in a blog. Probably both. I’m no economist, financial guru (to which my last set of brokerage statements will attest), or business seer. Nonetheless, I have two eyes, and a brain that occasionally produces a worthwhile thought.

Microsoft faces serious challenges ahead, which I think will result in another round of layoffs.

The most significant will be that the economy simply won’t recover as quickly as the company expects it to. (For that matter, this is also true of many other companies, and our Federal Government.) I say we’ll surpass 10% unemployment. And the “recovery” will be shaped like an “L,” and not a “U” or “V”. The result will be a very challenging environment for revenue and profit targets, even if all their products were on otherwise firm footing.

Another challenge will be specific to the Windows product line. Windows 7 won’t bring in the hoped-for revenue, even without this economic clime, for three separate but connected reasons.

  1. Google’s Chome OS FUD, and Apple’s $29 Snow Leopard upgrade price, will exert downward price pressure on operating systems. (Note that Snow Leopard will be available for sale one month before Windows 7.) Potential customers will question the pricing, and delay purchases while they push back (actively or passively) on Microsoft. ($120 or $200 vs. $29? Eh…hello? Yes, I’ve read the rationale that Snow Leopard is more like a Service Pack. Only problem with that argument is that it’s false.)
  2. Even without the noise about Chrome OS or Snow Leopard pricing, Windows users would upgrade more slowly than the company hopes. The thinking of Windows Vista users will be, “I won’t get fooled again. I’ll wait a while and see how Windows 7 shakes out before deciding whether to upgrade.” Windows XP users will think, “I’m glad I didn’t upgrade to Vista. That decision worked out just fine. Why should I upgrade to Windows 7, at any price?”
  3. At least one driver snafu will trip-up the marketing juggernaut. The breadth of Windows’ ecosystem is simultaneously an assert and burden. Some video or storage device will have a problem, and fairly or not, the online commentary will pounce on it.

So, if I were a betting man, I’d bet that Microsoft will miss its internal revenue and profit targets. And then cut costs for both real prudence, and to court investors’ perceptions.

If I’m wrong, it wouldn’t be the first time. (It also wouldn’t be the first time if I’m right.)

——
Update @ 7/9/2009: Robert Reich also believes we won’t see a recovery anytime soon. In fact, he thinks we won’t ever return to the previous economy, period. He’s right. My calling for an L-shaped “recovery” referred to our bouncing around in a flat domain for months, possibly years, before starting to tick up. But I think Reich’s vision is more correct. Whatever the next economy is, it can’t ever be like the past 25 years, because it was inherently unsustainable. Call it a scaled down, scaled back, or more rational economy. All of which spells even more downward pressure on corporate profits, including Microsoft’s.

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4 comments
  1. Think they will avoid another layoff due to their aggressive non-hiring of blue badges and their very short terms on their orange badge jobs.

    My understanding is that blue badge folks who are trying to move internally are finding positions that they are doing informationals for are abruptly disappearing once HR realizes somebody is seriously considering the job – this is a rather cunning strategy to minimize alarm ‘Sure we are hiring, look at all these jobs!’.

    And I know an orange badge who had a 90 day that lasted 90 days instead of doing the continual rolling update of years past.

    (I feel my bozo bit starting to go bistable, so off i go…)

    I believe the pain of unwinding multiple fiascos (great plains, msn, ) was baked into the current RIF and the further opportunities for pissing money away (starts with a Y…) have been walked away from.

    Note further that microsoft has not really bought anything lately, last thing was powerset and that was pretty much chump change (tho i am sure the powerset folks feel pretty good).

    ON the OS front….

    M$FT:

    Win7’s deploys a powerful technology called Failure to Appear to Completely Suck from the Get Go, and that really counts for something.

    I doubt seriously that they expect to make money on retail SKU’s, i think the day whenfolks did their own upgrades are over and done with.

    GOGL:

    Fucking ChromeOS. It’s very difficult to see the value proposition. What am i missing here?

    I was kinda enthused by the fact that the original EEPC’s ran something ubuntu-ish. But that appears to be the highwater for market penetration and the tide has rushed out pretty dramatically from there.

    To pontificate; it appears that google has reached that fork in the road where the finance team has done the revenue projections and says:

    ‘We need to diversify, what else have you got?’.

    M$FT hit that around 95-6 and thus we ended up with diversifying via Plan A (Copy Palm) and Plan B (Copy Nintendo). Execution of Plan A plus a smattering of Plan B (The foolish people at SEGA taught M$FT everything they knew about how to make a game console in order to have the DreamCast run WinCE) was what allowed myself and approximately 500 other souls (including many DEC refugee’s that you still probably hang out with) to be employed at BSQUARE.

    Then you can add hotmail, MSN, Great Plains, MSNBC and what ever the heck else as Plans C,D, E, etc…..

    As for google? The mighty combined brain power of google comes up with ‘hey, let’s copy Debby and Ian!’ and then they say ‘We’ll attach it to a cloud! with Social Networking! and Ruby! and sell keywords! the network will *be* the computer!’ (and then the google equivalent of cary fujii will say ‘i don’t think you want to say that last bit.’)’

    I will allow the folks at google the courtesy of a wait and see, but on the surface this seems super mundane and unbrilliant (guess i wont be getting any interviews there any time soon!).

    So my crappy and scratched recycled crystal ball indicates continuation of the status quo, only at a much less fiscally satisfying level for ourselves and our peers and for the hardworking college kids that thought that engineering internships actually paid pretty good money.

  2. Chris Abajian said:

    “and the further opportunities for pissing money away (starts with a Y…) have been walked away from. ”

    …or maybe not…

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