Satya Nadella
Satya Nadella

The size of the Microsoft layoffs this week — a 14 percent cut equating to about 18,000 positions — surprised some industry watchers for their magnitude, the biggest layoff in the software titan’s history.

“The company is signaling that it is serious about executing on its strategy and long-term opportunity and desire to bring about a culture shift to improve accountability and agility,” Sid Parakh, a stock analyst at McAdams Wright Ragen in Seattle, told GeekWire on Friday.

Meanwhile, longtime stock analyst Rick Sherlund added that the restructuring was bolder than he anticipated.

But on the GeekWire podcast and radio show this week, Todd Bishop and I offer a different perspective: Did CEO Satya Nadella go far enough?

“I think they should have cut more,” said Bishop. “And I hate to say that to the Microsoft people who are listening to the show, but I think for the good of the company, there would be a lot bigger statement to be made if Nadella had said: ‘Hey, we are actually going to cut 30,000 jobs total.’ Is that sacrilege to say that here in the Puget Sound region that depends on these jobs?”

No it is not.

Here’s the deal. A significant chunk of the cutbacks — 12,500 to be exact — are tied to the company’s acquisition of Nokia. That represents roughly half of the Nokia workforce, more than the 25 percent reduction that Sherlund anticipated.

Large-scale layoffs are commonplace after big acquisitions as redundant positions are eliminated, and the 50 percent chop at the Nokia unit appears to have satisfied analysts.

But excluding Nokia — a legacy acquisition of the Steve Ballmer era which can be debated — just 5,500 people at Microsoft are losing their jobs. That’s about five percent of the non-Nokia workforce.

Is that enough to get Microsoft moving in the right direction?

Maybe. Maybe not.

Kevin Turner
Kevin Turner

Perhaps more telling than yesterday’s job cuts were remarks made earlier this week by Microsoft COO Kevin Turner who concluded that the company’s operating system market share stood at just 14 percent, when taking into consideration smartphones, tablets and other devices. (See: Microsoft exec admits new reality: Market share no longer 90% — it’s 14%).

Could you imagine Steve Ballmer on stage at the Worldwide Partner Conference uttering these words?

Hard to imagine.

But it is a new era at Microsoft, one in which the company must adapt, change and iterate quickly. It needs to get scrappy and aggressive, ditching the monopolist mentality of yesteryear and embracing a new underdog startup mindset.

That’s going to take a huge culture shift, and a new style of workforce. And that’s one of the reasons we’re left wondering if the cuts went far enough.

Mini-Microsoft — the influential anonymous blogger who re-emerged this week to comment on the layoffs — has long touted the need for a slimmed down “lean” and “mean” Microsoft. In fact, he urged Microsoft to cut quickly and deeply. We agree.

It’s an incredibly tough challenge to change the course of a company Microsoft’s size. And it is made more difficult by the fact that many of the people who grew up with Microsoft as the dominant company of the 90s are still working there in some capacity.

For what it is worth, Wall Street seems to like Nadella’s new direction. The stock price jumped yesterday after the announcement of the cuts. In fact, since Nadella took over in early February the stock is up 17 percent.

“If they can pull off what (Nadella) is trying to pull off, it would be a big deal, and that is, eliminating all of the excess stuff that happens during product development,” said Bishop on the podcast, which you can listen to here.


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Comments

  • Dave

    The core Microsoft employee cuts are to small to get the agility Satya needs. Still too many people and too many middle managers. To many Microsoft people never talk to a customer. They all meet with each other, they all talk with each other, limited outside influence.

    The real question, as others have pointed out, is how far the contractor cuts go. If Microsoft really reduced contractor headcount markedly then perhaps the employee cuts could be the right total and that would be the way to force a more effective workforce.

  • Slaggggg

    I think you are exactly right. A 20% local cut would force managers to get rid of underperformers, and make everyone else sit up and notice. They did not go far enough.

  • http://blog.CascadeSoft.net @CascadeRam

    I think you’re asking the wrong question and so your answer is either irrelevant or wrong.

    IMO the right question is whether Microsoft is making the right 5,500 non-Nokia cuts (not whether 5,500 is too less).
    I’m sure that Microsoft has a lot of people who are contributing nothing (and a lot of managers who not only don’t contribute, but also make things worse with politics).
    However, I haven’t yet seen any indications that the layoffs primarily applied to poor/bad performers (and it doesn’t look like you have seen any evidence of this either). Anecdotally (from mini-msft) it seems like some employees with great review histories were laid off, but I don’t know if that is indicative of most of the layoffs or not.

    So for now, I don’t think we have any data to say whether these 5,500 layoffs are going to help Microsoft or not (and we certainly don’t know if doubling or tripling this number will help)

    • Chris

      THIS. They’re firing all the best people so they clearly do not give a rat’s ass about quality. It’s 100% about financial gain.

  • Samir Shah

    I do not agree. The cuts were just right. All the contractors were removed.

  • GLS

    I haven’t seen any evidence that the cuts will make Microsoft more “agile”. It’s still a monstrously huge company. You could cut half the workforce and you would still be left with a monstrously huge company. Also, people throw around the concept of agility, but very few know what it really means. During my time at Microsoft, I heard people talk about this all the time, but it’s just a buzzword to them.

  • http://www.bellevuefineart.com/ panacheart

    It didn’t go far enough in the Puget Sound. You could easily cut 15%-20% in the Puget Sound. There’s so much fat here.

    But that won’t help unless the organization is streamlined, and despite the changes the company is still monolithic, and that’s the reason it’s slow moving. Eliminate that problem and people will be able to work. Right now many of the non performers have their hands tied behind their backs.

  • Old Mark

    I’ve worked in software companies since 1993 in various roles including work as a vendor/contractor for Microsoft and Apple. Microsoft was never an outstanding, innovative company focused on great software. They were from the start a calculated take on producing a revenue stream from corporate IT. And they did a great job at it. But it’s re-imagining history to say that Microsoft’s success was from great, innovative, creative products and solutions. They were and are the ultimate insider rigging the game. And it works. No shame in gaming the system. But they were never about seeing to customers needs or pushing original solutions. They were about building Very Big Walls and making sure no one could tunnel underneath. Maybe they can change, but honestly it’s not in their DNA.

  • Chris

    The problem is they’re cutting all the WRONG people!!! EVERYONE loses here. My team at MS lost all of the best, most talented and experience people this week, proving that there is NO interest in quality. The people who made this company great got fucked over, which will now cause product quality to suffer, which means the people who BUY all those MS products that WE made great are fucked over too, who will then stop purchasing MS products. Not to mention the insecurity all the remaining employees must live with knowing you can lose your job any given day no matter how hard you work…thus further decreasing product quality. Etc, etc, etc, etc…. So yeah, fuck this new greedy, heartless, self-absorbed jerk. I didn’t move across the country, leave my entire family and dedicate my career/life to a company that is going to cold-shoulder its workforce like this when one new guy comes in and starts flipping tables..

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