Ballmer wimps out in first challenge
In December, IAC head Barry Diller (http://en.wikipedia.org/wiki/Barry_Diller) had harsh words for CEOs of profitable companies who lay off workers:
[“The idea of a company that’s earning money, not losing money, that’s not, let’s say ‘industrially endangered,’ to have just cutbacks so they can earn another $12 million or $20 million or $40 million in a year where no one’s counting is really a horrible act when you think about it on every level. First of all, it’s certainly not necessary. It’s doing it at the worst time. It’s throwing people out to a larger, what is inevitably a larger unemployment heap for frankly no good reason.”] (http://blogs.reuters.com/summits/2008/12/04/diller-to-profitable-companies-lay-off-the-layoffs/)
With that in mind, I am rather disgusted that Microsoft aims to lay off 5,000 workers (http://tech.yahoo.com/news/ap/20090122/ap_on_hi_te/earns_microsoft), their first major layoff ever, to keep their profits from dropping below $4B per quarter. Yes, a company that reported a $4B profit last quarter is laying off 5,000 workers.
Now, for all I know, these guys are being paid a million a year, so losing their salaries would really help the bottom line and they could afford to be unemployed, but I kind of don't think that's the case. If it were, these would be retirements, not layoffs.
To put this in perspective, if we scale down the company by a factor of 1,000, we'd be looking at 5 employees being let go from a total of 94. Doesn't sound so bad, except the company made $4M last quarter. Again, I must wonder now much those few are being paid that their salaries have any effect on that bottom line.
The argument for layoffs, as analysts have made, is that Microsoft needs to protect their stockholders. That's fine, except the company is in no danger of losing money. It is not "industrially endangered". If anything, the biggest threat to Microsoft is an inability to predict and keep pace with the market. That's not a problem you can solve with layoffs.
No, the problem is not stockholder safety, but the CEO's unwillingness to stand up and say, "Four billion dollars is still a huge quarterly profit." Congratulations Ballmer (http://en.wikipedia.org/wiki/Steve_Ballmer). Your first big test and you came up with the blue screen of death (http://en.wikipedia.org/wiki/Blue_Screen_of_Death).
[+/-] Hide/Show Text
[+/-] Hide/Show Text
Labels: aimless musing
Ballmer wimps out in first challenge
posted by Sumocat at 1/22/2009 08:59:00 PM
6 Comments:
No one should be deciding how much money is acceptable for a company to make except for the people who own that company. No matter if its a small business like mine or a big one like MS. If getting rid of 5000 workers eliminates middle men and unnecessary bureaucracy from Microsoft that could certainly help them keep pace with the market. Microsoft’s “challenge” as a business is to make money and increase market share, not trying to figure out how to keep 5000 workers they probably don’t need.
By
James A. Morman, at 1/23/2009 03:52:00 AM
So people outside a company should not be criticizing how that company operates? Not sure I agree with that, but even if I did, I'd still have permission to criticize since Microsoft is a publicly traded company.
Anyone who has money in a tech fund (which unfortunately includes me) probably owns a piece of Microsoft, and I did specifically select a fund that included them. If that's not good enough, I can hop over to OneShare.com to cement my right to criticize with a crisp stock certificate. Would that be sufficient, or do I have to be a majority owner to have permission to voice my opinion?
By
Sumocat, at 1/23/2009 07:59:00 AM
Criticize away :)
By
James A. Morman, at 1/23/2009 08:11:00 AM
Thanks, I will. And just to clarify, my beef is with Ballmer's leadership on this. If he can't stand up for his employees when the company is making a substantial profit, what's he going to do if times really do get tough? When I look at Microsoft, I see great technology hobbled by unimaginative marketing and now weak leadership. If they were turning over that leadership and marketing, I could agree with that on the basis of moving the company in a different direction, but these are broad cuts for the sake of padding the bottom line. Fewer people doing more of the same does not denote a strategy.
By
Sumocat, at 1/23/2009 09:31:00 AM
Cutting your workforce can be part of a strategy. I work on a much smaller scale but I have seen first hand more work get done when less people were working. A good leader does stand behind his workforce, I take responsibility for everything my people do. However, if I see a place where we can save money, I do it, regardless of how much money I have already made. That's just good business. Payroll and benefits makes up the largest percentage of most companies expenses, so that gets looked at first.
Another thing I have heard since last October is that many businesses were going to make pre-emptive layoffs in anticipation of the economic situation and the incoming administration. I have seen many businesses to do this but not admit that that was the reason. The only one I have seen admit publicly that they did it for this reason was World Wrestling Entertainent (only because I follow wrestling). They cut 10% of their office staff across the board and a number of wrestlers and referees.
By
James A. Morman, at 1/23/2009 01:32:00 PM
I'm all for strategy, but Ballmer didn't lay down a strategy. He cited the weak economy as the reason, or rather, excuse. Had he announced retirements, as Sony has done following their first-ever loss, or a restructuring plan, like GE is with their major drop in profit, then I could admit he's doing something. But he didn't. Instead of pushing a strategy that involved layoffs, he wimped out and blamed the economy for the layoffs. That's not good leadership.
By
Sumocat, at 1/23/2009 02:25:00 PM
Post a Comment
<< Home