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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

January 22, 2009 at 9:10 AM

Microsoft cuts are tough, but state should be grateful it’s not worse

Not to diminish the hurt of people losing their jobs at Microsoft in any way, but the state of Washington should be elated that Steve Ballmer’s using a paring knife instead of an ax.

While the Puget Sound region will suffer the most from the layoffs and expense cuts announced today, the overall cutbacks still won’t diminish the benefits of Microsoft’s ongoing investment here in people, products and buildings.

Seattle is used to seesaw employment at Boeing, which just announced that it’s cutting 4,500 jobs this year. The permanent loss of Washington Mutual was a much bigger hit.

Really, 1,400 jobs lost at Microsoft today and perhaps a total of 5,000 jobs over the next 18 months is small potatoes compared with what’s happening across the tech industry, especially at PC-centric companies coping with the end of a strong five-year run in computer sales.

Just Wednesday, Intel announced that it’s cutting 6,000 jobs, including 1,000 manufacturing jobs just down the freeway in Hillsboro, Ore.

A little farther south, Corvallis, Ore., is trembling in anticipation that Hewlett-Packard will completely shutter a 2,500-person facility that develops and produces inkjets and other printing technology. HP’s been steadily whacking away at that small city’s largest private employer for years, keeping employees and the entire region in a state of uncertainty.

In contrast, Ballmer’s doing nips and tucks at a company that clearly needed to rein it in. Don’t get me wrong — the construction and hiring are terrific, and bring all sorts of new jobs and smart people to the region.

But current and former employees, and everyone else who has driven by the audacious campus expansion project that’s continuing in Redmond, have been shaking their heads, wondering how long Microsoft can keep trying to out-recruit and out-invest Google, IBM, Apple and Sony all at once.

That’s just the external appearances. Internally, Microsoft’s been struggling with organizational sprawl for years — a perpetual battle of the bulge that distracts managers, frustrates employees and sometimes compromises the quality and timeliness of products. Windows Vista is Exhibit A.

Microsoft is also nodding to Wall Street. The company promised last quarter that it would cut costs, and today it’s following through. Trimming nearly $1 billion in expenses will hopefully satisfy investors and reaffirm that Microsoft’s on sound footing.

Yet the actual cuts are still relatively small from the perspective of Microsoft’s scale and moves taken by others in the industry. We would have seen much bigger layoff numbers — or 5,000 cuts at once — if Ballmer and Co. were kowtowing to investors. I’ll bet they end up cutting fewer han 5,000, by the way, especially after Windows 7 takes off and investors start looking further ahead.

Today’s cuts aren’t a radical transformation of Microsoft. It’s a little in-patient liposuction, so the company will fit into the smaller pants it has to wear for a while.

Comments | Topics: Microsoft


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