The Microsoft job cuts are necessary and really aren't as large as they seem

Microsoft CEO Satya Nadella sent around an electronic mail to employees last week. For those reading between the lines it was a articulate message that chore cuts were coming. Today they made it official. Microsoft will cutting up to 18,000 jobs in the coming months.

I think he's doing what needs to be done, and I suspect this will setup Microsoft to be more than successful in mobile and cloud services.

I've been following the engineering sector for a long time. Usually when a company announces major job cuts information technology ways they are in trouble, but it would be a sweeping generalization to say this is always the case. I call back when BlackBerry (and then Inquiry In Movement) appear a pregnant circular of cuts back in the early 2000s. Analysts and investors freaked out. But in reality the visitor was just cleaning firm as it prepared for even faster growth. The business went on to hit incredible new highs. Job cuts are not always a bad sign.

It's also very common for companies to cut staff subsequently a major conquering. Think that of the 18,000 job cuts Microsoft appear a full 12,500 are coming from the Nokia sectionalization. Within Nokia many of these are likely to exist factory positions because the vast majority of Nokia's hardware was not yet running Windows Phone. There isn't really any point in making feature phones anymore, so Microsoft is doing what needs to be done.

Normally in these types of transactions the seller wants to look good and structures the deal such that all layoffs are the responsibility of the big, bad buyer. Then I'd practically ignore the 12,500 Nokia job cuts because they are obvious and something Stephen Elop would have had to exercise anyhow if Nokia stayed contained.

So that leaves about five,500 core Microsoft job cuts, or about five% of the company's workforce excluding Nokia. This really doesn't amount to much of a cutting, does it?

And nosotros're already seeing evidence that these cuts are, at least in role, focused on the operating systems grouping. I recall this makes sense. Nadella doesn't talk about desktops. He talks most mobile and deject. Given the long history of Microsoft'due south dominance in the old world of the desktop Os they almost certainly take far more employees than they need.

If Microsoft is going to excel in mobile applications and services tied to the cloud then they need to refocus their free energy. Today'south announcement is probably just the first move. I wouldn't exist surprised of more cuts come later.

Money-wise, this will toll the company between $one.1 and $one.vi billion. At the midpoint of the range information technology works out to about $75,000 per employee. This is very typical in all of the layoff rounds I've seen announced in my years following stocks. Because Microsoft has a market place value of $372 billion equally of this writing, the toll of these layoffs are inconsequential.

Naturally, nosotros wish all afflicted employees the best possible outcome.

(Chris Umiastowski is a contributing fiscal writer to the Mobile Nations network. You tin can run across the rest of his posts here atAndroidCentral, iMore and CrackBerry. )

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