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Steve Ballmer's Entire Memo to the Microsoft Troops About Layoffs and Weak Results
Posted Jan 22, 2009 09:46am EST by Kara Swisher in Investing, Products and Trends
From All Things Digital, Jan. 22, 2009:
Here is the full memo from Microsoft CEO Steve Ballmer about the 5,000 layoffs and cost cuts just announced, due to economic slowdown, which also resulted its weak financial results for the second quarter.
From: Steve Ballmer
To: All Microsoft FTE
Subject: Realigning Resources and Reducing Costs
In response to the realities of a deteriorating economy, we’re taking important steps to realign Microsoft’s business. I want to tell you about what we’re doing and why.
Today we announced second quarter revenue of $16.6 billion. This number is an increase of just 2 percent compared with the second quarter of last year and it is approximately $900 million below our earlier expectations.
The fact that we are growing at all during the worst recession in two generations reflects our strong business fundamentals and is a testament to your hard work. Our products provide great value to our customers. Our financial position is solid. We have made long-term investments that continue to pay off.
But it is also clear that we are not immune to the effects of the economy. Consumers and businesses have reined in spending, which is affecting PC shipments and IT expenditures.
Our response to this environment must combine a commitment to long-term
investments in innovation with prompt action to reduce our costs.
During the second quarter we started down the right path. As the economy deteriorated, we acted quickly. As a result, we reduced operating expenses during the quarter by $600 million. I appreciate the agility you have shown in enabling us to achieve this result.
Now we need to do more. We must make adjustments to ensure that our investments are tightly aligned with current and future revenue opportunities. The current environment requires that we continue to increase our efficiency.
As part of the process of adjustments, we will eliminate up to 5,000 positions in R&D, marketing, sales, finance, LCA, HR, and IT over the next 18 months, of which 1,400 will occur today. We’ll also open new positions to support key investment areas during this same period of time. Our net headcount in these functions will decline by 2,000 to 3,000 over the next 18 months. In addition, our workforce in support, consulting, operations, billing, manufacturing, and data center operations will continue to change in direct response to customer needs.
Our leaders all have specific goals to manage costs prudently and thoughtfully. They have the flexibility to adjust the size of their teams so they are appropriately matched to revenue potential, to add headcount where they need to increase investments in order to ensure future success, and to drive efficiency.
To increase efficiency, we’re taking a series of aggressive steps. We’ll cut travel expenditures 20 percent and make significant reductions in spending on vendors and contingent staff. We’ve scaled back Puget Sound campus expansion and reduced marketing budgets. We’ll also reduce costs by eliminating merit increases for FY10 that would have taken effect in September of this calendar year.
Each of these steps will be difficult. Our priority remains doing right by our customers and our employees. For employees who are directly affected, I know this will be a difficult time for you and I want to assure you that we will provide help and support during this transition. We have established an outplacement center in the Puget Sound region and we’ll provide outplacement services in many other locations to help you find new jobs. Some of you may find jobs internally. For those who don’t, we will also offer severance pay and other benefits.
The decision to eliminate jobs is a very difficult one. Our people are the foundation of everything we have achieved and we place the highest value on the commitment and hard work that you have dedicated to building this company. But we believe these job eliminations are crucial to our ability to adjust the company’s cost structure so that we have the resources to drive future profitable growth.
I encourage you to attend tomorrow’s Town Hall at 9am PST in Café 34 or watch the webcast.
While this is the most challenging economic climate we have ever faced, I want to reiterate my confidence in the strength of our competitive position and soundness of our approach.
With these changes in place, I feel confident that we will have the resources we need to continue to invest in long-term computing trends that offer the greatest opportunity to deliver value to our customers and shareholders, benefit to society, and growth for Microsoft.
With our approach to investing for the long term and managing our expenses, I know Microsoft will emerge an even stronger industry leader than it is today.
Thank you for your continued commitment and hard work.
Steve
For more news, go to All Things Digital.
Yahoo! Finance User - Thursday January 22, 2009 10:37AM EST
"He should lay himself off. I am typically not someone who just bashes leadership, but has he done anything right?" Yeah, he walked away from the Yahoo deal. Talk about dodging a grenade.
Hunkar - Thursday January 22, 2009 10:39AM EST
I am suggesting to send all level management jobs to outsource india, china and other countires. I am sure they will perform better than these ass holes.
Jay - Thursday January 22, 2009 10:42AM EST
They must intend on doing a lot of spending this quarter...a billion dollar profit is pretty good considering the conditions on which they made it. I'd like to know how much cash they have on hand right now.
Elron - Thursday January 22, 2009 10:43AM EST
With only 10% of businesses using Vista, the writing is on the wall. It's a pathetic loser. Revive XP and dump Vista and OS 7 plans. Quit trying to force people to upgrade to crap.
Robert - Thursday January 22, 2009 10:43AM EST
it will be a shame to see all these H-1B employees go back to India and China
Bill - Thursday January 22, 2009 10:44AM EST
How can any customer have brand loyalty when the company itself doesn't show loyalty to their own employees. The problem is MS is contributing to this country's economic crisis. We now will have 5000 more people on unemployment. When you multiply that by the thousands of other companies out there that are laying off people while still making large profits you can see why the unemployment rates are skyrocketing. This is very shrotsighted thinking in my opinion. Very few companies bounce back once they go down this road.
Yahoo! Finance User - Thursday January 22, 2009 10:45AM EST
The market’s having another whiskey-Bonanza.
Yahoo! Finance User - Thursday January 22, 2009 10:46AM EST
Pathetic comments by bums. How do you losers have access to internet? Are you all in the same Starbucks right now? Get over yourselves immediately.
__A_YAHOO_USER__ - Thursday January 22, 2009 10:47AM EST
In economics slowdown......What Micrsoft dis is normal like other companies in the sector and outside the sector of Techhnology..........see year 2001,2002,and 2003...... Think not Microsoft but the economics condition here and overeseas..........Fair enough that is my ratings........ Normal in this situtation.......More whisky........and be happy....Just one shot.......
Yahoo! Finance User - Thursday January 22, 2009 10:50AM EST
Bill Gates won’t be coming back. His work is done and now he’s moved on to more meaningful activities. He’s smarter than his peers (Steve Jobs in particular) in that respect.
Yahoo! Finance User - Thursday January 22, 2009 10:52AM EST
Microsoft pay is very decent, over $80K average, it will surely help future earnings http://www.salarylist.com/all-real-jobs-salary-at-microsoft-corporation.htm
Yahoo! Finance User - Thursday January 22, 2009 10:54AM EST
they still made a PROFIT- and a HUGE one at that. I AM an ivestor in MS- and the culture, the teamwork, the innovative solutions are why I am an investor- I dont care about this quarter/next quarter- the economy is rogh- everyone knows that. a company like MSFT is people- its ideas and creativeity and execution. this is very disheartening.
rob - Thursday January 22, 2009 10:54AM EST
What a joke. They make over 4 billion dollars and they lay off 5,000 people. Something is drastically wrong with top management in this country. Maybe all these companies that are having layoffs should offshore their management. The clowns that are running the show aren't doing anybody but themselves any good.
barcodewill - Thursday January 22, 2009 10:55AM EST
How about paycuts for management....a little sacrifice??? Ballmer shows no imagination...slash cost, but keep staff...also, Vista is no great shakes worthy of having to replace your existing software...companies have better things to do than re-train and buy new software for the sake of MS. Great company...could have impacted the nation with a report of hey we made plenty of $ and we will help see America past the fog of Bush-Cheney collapsed economy...MS will cut pay 20% on entry staff...Exec compensation upto 50%
Katy C - Thursday January 22, 2009 10:56AM EST
No one in this world is more charitable than Bill Gates.
Yahoo! Finance User - Thursday January 22, 2009 10:57AM EST
Silver In : Less New Lows for stocks on recent market down turns with advance / decline line turning up spells rally big time. Silver Out
RainbowMeow - Thursday January 22, 2009 10:58AM EST
I think it's fair to say that the real estate bubble in Seatle will now come to crashing halt. MSFT has lost its soul and will never be the same. With the stock price back to 1997 levels, the storied MSFT millionaires is a dwindling club.
Yahoo! Finance User - Thursday January 22, 2009 10:59AM EST
Microsoft had 79,000 full time employees. Most business leaders would agree that cutting the bottom 5% of the workforce from a productivity standpoint would substantially benefit the company. Take 5% (3950 of the 5000 layoffs) that are under performers out of the mix and you are essentially letting go 1050 employees or 1.3% of the workforce. Not too bad for this economy. Mr. Ballmer is right on track and doing what he needs to keep Microsoft growing.
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Christopher - Thursday January 22, 2009 10:34AM EST
Just a nice excuse to rip off their employees. Apparently they won't have to push for so many H1-B's... er wait is that slowing at all? I doubt it. I think it's funny how a dynamic company like M$ can go almost a decade with hardly an improvement in their primary consumer products. They look a lot more like IBM did 20 years ago than anything they have always claimed to be. I'll stick with Ubuntu Linux, Thank you! I'l stick with my UBUNTU line