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.
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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