Is Microsoft Planning Its First-Ever Layoffs? - Page 2

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Bad PR

Both former managers pointed out that Microsoft has always taken pride in the fact that, unlike most of its competitors and partners, it has never had to have general layoffs in its 33-year history -- and often uses that as a talking point when it is hiring.

Still, neither is calling the speculation an impossibility.

"This might be the first real employee cut-back (pure layoffs) at MS at the corporate campus," the second manager said in an e-mail to InternetNews.com.

"If it happens, it will generate negative PR in the press for MS, being the first official layoff ... [but] I think they may have to do that in order to include it in their outlook report along with their 2Q earnings report," the manager added.

Additionally, if Microsoft does announce layoffs, departures aren't likely to begin immediately. U.S. companies are governed by the 1989 Worker Adjustment and Retraining Notification Act (WARN), which requires 60 days' notice before layoffs can commence.

Rumors of rumors

The rumors of pending layoffs surfaced just before Christmas in the Mini-Microsoft blog, an insider's blog authored anonymously by a person who claims to be a well-placed company insider.

Yet, in a post on Tuesday, Mini-Microsoft discounted the rumors: "Did I hear any solid facts during all the snow parties I slushed around at during the Christmas holidays? Nope. Just still a bunch of second-hand rumors, probably filtered through people's own agendas and likes and dislikes."

However, officials said in October, during the company's fiscal first-quarter 2009 earnings call, that they are slowing the growth of capital spending, particularly in the area of datacenters needed to support Microsoft's future cloud computing plans.

While the company lowered its growth predictions for the current fiscal year, however, it continued -- at least as recently as Microsoft's annual meeting in November -- to predict year-over-year growth, albeit slowed somewhat from previous years.

Microsoft showed 18 percent year-over-year growth for fiscal 2007. In October, officials said it was still on track for 7 percent growth in fiscal 2009, which ends on June 30, 2009.

Where to cut?

Enderle said that if Microsoft goes through with the rumored cuts, he expected to see the ax fall hardest in areas that are underperforming, such as units of the Entertainment and Devices Division and the Online Business Division.

Granted that Entertainment and Devices, headed by president Robbie Bach, has the profitable Xbox game consoles, it also has the Zune music player, a serious underperformer in Microsoft's portfolio.

Meanwhile, starting Jan. 5, the online services business will be led by newly named president Qi Lu, a former Yahoo executive vice president. His new domain includes Microsoft's troubled Live Search business as well as online advertising.

Fudzilla, in its post, suggested that MSN is also ripe for cuts, and that Microsoft's Europe, Middle East and Africa sales group may also feel the knife. Among the rumors posted on Mini-Microsoft, some also suggested cuts may be coming in Microsoft's finance group.

One thing that almost everyone agreed with, however, is that product groups with highly successful products, including the Office organization, would likely be spared the most brutal cuts.