Report: Microsoft considers major job cuts

Analyst disagrees, thinks the company will accelerate its ongoing layoffs.

Microsoft may start a "significant" round of layoffs as early as next week, according to a report in the Wall Street Journal Thursday.

Citing unnamed sources it claimed were familiar with Microsoft's plans, the newspaper said the company is considering "significant work force reductions" across multiple divisions, but did not specify the number of workers who would be affected.

And the Journal hedged its bets somewhat. "Plans for the cutbacks are still in flux and Microsoft could end up finding alternative methods of reining in costs," the paper reported.

If Microsoft does announce layoffs, it would join other big-name technology companies that have recently scaled back employee head-counts, including Google and Oracle. The former said today that it is laying off 100 recruiters and closing engineering offices in Texas, Norway and Sweden, while the latter reportedly made "major" cuts in its workforce last week , with more in the offing.

Rumors of possible layoffs at Microsoft have been circulating for weeks, with the number 15,000 most often cited as a target for any reduction.

Rob Helm, an analyst with Directions on Microsoft, a research company that focuses on the Redmond developer, doesn't think large cuts are likely. "I don't think we'll see any major layoffs next week," said Helm, referring to the run-up to Thursday, when Microsoft is scheduled to reveal its earnings for the past quarter. "The company always has a rolling layoff and that may accelerate."

Microsoft tends to regularly reorganize its operational divisions and working teams, Helm continued, with the idea that the lowest-rated workers in the company's review system are then shoved out the door. "When the company reorganizes, some people don't have chairs when the music stops," said Helm. "We may see some more of that activity."

Historically, Microsoft has steered well clear of massive layoffs. In Helm's memory, for instance, the largest was a drop of some 600 employees in the Microsoft TV group during the dot.com bust early in the century. "But that was more about scaling back and refocusing," Helm argued, not layoffs for their own sake.

That's not to say Microsoft doesn't face the same pressure that's been driving other major technology companies to shed jobs. "The reality is that Microsoft has to protect its margins, and some of the highest-margin customers, like those in the financial sector, are really hurting. [Microsoft] has to keep costs under control, too," Helm said.

How the company handles any cutbacks is the question, said Helm. His take: "I expect that next week [during the earnings call] Microsoft will announce what it's already doing to keep costs under control, and ... that will be to manage out people, cut some small business units and clear out the dead wood."

Microsoft declined to comment on the Wall Street Journal report. "Microsoft does not comment on rumors or speculation," a spokeswoman said today in an e-mail reply to questions.

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Gregg Keizer

Computerworld (US)
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