PC sales slump to bite even Microsoft

With the PC market tanking along with the rest of the economy, Microsoft is seen as unlikely to be able to live up to the financial forecast it issued in October.

The company is set to release its quarterly earnings after the markets close on Thursday.

In a further sign of just how rough the economy is, Microsoft is also expected to announce shortly its plans for a significant, companywide layoffs. Although Microsoft has cut jobs in a particular unit or location in the past, it has managed to navigate through all past downturns without having to resort to such broad job cuts.

But as CEO Steve Ballmer told CNET News earlier this month, this is no ordinary downturn.

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Previewing Microsoft earnings
Ina Fried talks with CNET editor Jennifer Guevin about where Microsoft is likely to make cuts and what to expect on their earnings call Thursday.
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"The fact of the matter is, this is not a downturn, this is a bit of a reset," he said in an interview at the Consumer Electronics Show in Las Vegas. "Those are quite different and we're trying to really suss through what we think that means for us."

There has been much speculation over just what that "sussing" will result in, with expectations ranging from no full-time job cuts to one report that suggested the software maker could trim as many as 17,000 workers from its 95,000-strong payroll. More recently, analysts and others have suggested Microsoft might cut several thousand workers, but stop short of layoffs that would add up to double digits.

Fears were heightened this week as Microsoft workers found themselves unable to access an online tool, known as Headtrax, that provides a company organizational chart. An error message said that the tool was unavailable but scheduled to be operational by Friday.

As for the financial results themselves, Microsoft had projected in October that it would manage per-share earnings of 51 cents to 53 cents per share, with revenue in the range of $17.3 billion to $17.8 billion.

Analysts are now forecasting results more along the lines of $17.1 billion, with per-share earnings of 49 cents, according to Thomson Reuters.

For the current quarter, which stretches through March, analysts are projecting earnings of 48 cents per share, although estimates vary from 42 cents to 52 cents, again according to Thomson Reuters. Revenue for the period is pegged at $15.1 billion.

[42istheanswer]

Stockholder is king. Worker is tool.

[Mam00th]

At MS, a lot of people hold stocks from the company. As in a lot of companies anyways...

[elllroy]

companies which layoff people when they are still making huge profits are fundamentally evil. this downturn shows how morally rotten modern capitalism is or has become. we need more regulation on this front. if i were in charge i would forbid companies to have layoffs as long they make a profit. that's a simple easy to execute concept to protect society from this unbelievable greed of the few.

[slecalvez]

Google laid off a couple of thousands while making a LOT of money, does that make them evil also? AS evil a Microsoft or even more? (sarcasm)

[rcrusoe]

If you forbad a company from having layoffs until they became unprofitable then it is highly likely that everyone in that company would lose their job. In many cases layoffs are not a case of greed, it's a case of survival. Especially in the case of publicly traded companies.

If a company can't pay its stockholders more than they can earn somewhere else, no one would buy its stock. No stock sales mean no company which means no jobs.

Capitalism isn't perfect, but the alternative is a society like the old Soviet Union, where neither you or I would be typing our thoughts on a web page. We'd be standing in line outside a grocery store hoping there would be a bread delivery this week.

[freemarket--2008]

So it's ok for someone the company depends on to jump ship when a better job comes along, but the company can never lay off someone they no longer need? In a free market it works both ways.

Layoffs are usually the time when the least productive workers are let go. Those who value and maybe enjoy their work are less likely to be included. Of course in union shops this is distorted by seniority rules.

[eriew]

You know there is trouble when the Organizational Chart disappears from view.

[Penguinisto]

@ellroy: Sometimes a body has to shed a few pounds. Divisions within Microsoft are unprofitable. Some areas have headcount that is higher than what is needed. Some groups have folks who get paid a lot to do nothing productive. Think of it as the corporate equivalent of dieting and hygiene - you have to trim your fingernails, your hair, and keep the fat off somehow...

Every form of economic theory sucks, but capitalism sucks the least - of all the ones humanity has tried so far, anyway...

/P

[elllroy]

sorry, i was not clear on that. of course every company has the right to layoff people. and they even have to to stay competitive, to change, to reorganise. but these layoffs are not individual layoffs but structural layoffs (i don't know the english word, in german it is "betriebsbedingt", maybe "made redundant").

the reason for these mass layoffs is a little bit of a falling profit (they are afraid that quarterly NET PROFITS will fall from 4bn to 3bn) and therefore they layoff 5000 people. if this isn't greed of the worst order i don't know.

and yes, i am not talking about microsoft alone here, every company which does something like this, google included. again i am talking about mass layoffs because of lesser profits.

before a company goes bancrupt there are a lot of means to reduce headcount, reorganise and shrink and if they are in the red also mass layoffs are necessary but not as long as you have these huge profits every month.