Ballmer on Microsoft's new layoffs notices

In the wake of handing out 3,000 layoff notices Tuesday, Microsoft CEO Steve Ballmer sent an e-mail to staff.

Ballmer characterized the cuts as the second phase of the plan announced in January. At the time, Microsoft said it would cut 5,000 jobs over an 18-month-period. With the cuts made in January and those announced on Tuesday, Microsoft has now nearly eliminated all those positions.

Here is the text of Ballmer's e-mail, which was seen by CNET News.

From: Steve Ballmer
Sent: Tuesday, May 05, 2009
To: Microsoft - All Employees
Subject: Update: Realigning Resources and Reducing Costs

In January, in response to the global economic downturn, I announced our plan to adjust the company's cost structure through spending reductions and job eliminations. Today, we are implementing the second phase of this plan.

This is difficult news to share. Because our success at Microsoft has always been the direct result of the talent, hard work, and commitment of our people, eliminating positions is hard.

Today's action includes positions in the United States and in a number of countries around the world. In the U.S., affected employees will be notified directly by their managers today. In other countries, local leadership teams will provide more specific information about the impact to their organizations.

With this announcement, we are mostly but not all done with the planned 5,000 job eliminations by June 2010. We are moving quickly to reach this target in response to consistent feedback from our people and business groups that it's important to make decisions and reduce uncertainty for employees as quickly as possible, and so that organizations can concentrate their efforts and resources on strategic objectives.

As we move forward, we will continue to closely monitor the impact of the economic downturn on the company and if necessary, take further actions on our cost structure including additional job eliminations.

For those of you directly affected by today's announcement, I want to thank you for your contribution to Microsoft and assure you that we will continue to provide support as we did during the previous job eliminations.

And for everyone across the company, I want to reemphasize how much I appreciate the way you have pulled together to help the company respond to this difficult economic environment. There's no doubt that these are very challenging times. But together, we are making the right choices to ensure that we will continue to deliver great products and position ourselves for strong future growth and profitability.

Thank you for your continued hard work, commitment, and focus.

Steve

[Random_Walk]

So, err, when does Ballmer take a pay cut, if indeed he feels so much for those that he's about to give the axe to?

[Mr. Dee]

You are talking like Microsoft hired Ballmer this morning and paid him a 1 billion dollar salary. As an executive who has contributed tremendously since 1980, he is very much entitled to his $1,095,000 in salary and bonuses. You think Microsoft products and services sold itself in the 90's and 2000's? I was reading the other day on OSNews that Ballmer himself is closely involved with a select group of Microsoft customers providing continual talks about improving the Company's products for their markets. Is Steve Jobs doing that? With him, its a take it or leave it.

You are acting like Steve Ballmer is at fault for the world wide recession. Please don't waste CNETs precious bandwidth with comments like that Randon_Walk.

[Random_Walk]

It does not matter when Ballmer joined the company, and yes, I know who he is.

However, he is also just as responsible for the company's well-being as any other employee, and in many cases even more so.

Blaming it all on the economy is a sign of weakness, especially if Microsoft is, as alleged, still making a profit.

Also, your comparisons with Steve Jobs is based on assumptions which neither of us have the answer to, and in a wholly different market, with different dynamics (that is, consumer vs. business).

So, I ask again, when can we expect to see Steve Ballmer take a pay cut to help contribute towards the overall belt-tightening that Ballmer himself is shedding so many crocodile tears over in his letter?

[biffhenerson]

Perhaps he has been underpaid all along and now his pay is more in line with the slow economy as you desire it to be. The bottom line is that people are worth whatever they can get someone else to pay them. Eliminating someone elses job or the creation of new jobs may have nothing to do with it. Its simple supply and demand. Im guessing that there are lots of companies that would pay Ballmer twice what he is getting from Microsoft. But he ain't leaving. Ever.

[Random_Walk]

$1.09m USD per annum (not counting stock options) is "underpaid"?

Wasn't there a rather large bit of howling a few weeks ago over certain auto-making CEOs and how much they got paid?

[loose_screw]

There's no such thing as employee loyalty these days, even Apple has laid off employees or cut them from full time to part time.

Unfortunately, that's the reality these days. Human capital isn't valued very much despite most companies' claims about people being their "most valuable asset." It's all talk, and Microsoft is no different. They're just a bigger target for smack talk, and maybe deservingly so.

The lesson from this? Act like a contractor, and treat your income like lottery winnings, because it may not always be there.

[Random_Walk]

Dunno - Apple only laid off a smaller number, the majority of those were retail jobs (and not career-building ones).

Also, I did the contractor thing. It paid okay, I was almost always in demand, but I like the permanent gig better. The corp I work for is doing very well in spite of the economy, and it's nice to have real health/vacation/junket benefits without paying a ransom for it.

[slapppy]

Why? They made a profit. Sure not as much as they wanted, but still a profit.

[gsigas]

That upsets me as well. I understand mass lay offs as a matter of survival, but not as a tactic to squeeze out more profit. There is no need to lay off large numbers of people when a company is profitable, has large cash reserves and is performing better than competitors. Also why not give the option for all employees (including managers and executives) to take an across the board pay cut (5 or 10%) rather than laying off large numbers of people?

[SIGHUP]

Businesses are not charities, they are there to make money. If an employee job is not needed or an employee is not making enough money to justify their job then you have to let them go despite if the company is profitable. That is why companies remained profitable. And if you do not, you have a situation like GM.

[Renegade Knight]

They are trying to impress Wall Street and not so much the employees who make the company work. It's acutally a sign of a sick company.

Owners would be better served breaking MicroSoft up into pieces and spinning them off as stand alone compaies. Long run shareholder value isn't really a Wall Streer value let alone a CEO value these days. GM short runned itself into the ground.

[slapppy]

"They are trying to impress Wall Street and not so much the employees who make the company work."

What a terrible and sick decision. Peoples lives played like chess pieces in order to impress "Wall Street".

[bwvla]

SIGHUP: You say "businesses are not charities." That may be true. However businesses are part of a community, and of a nation. If they do not play a positive role to the social and political institutions to which they belong they should face scrutiny. Laying off workers in a recession while still operating deep in the green can be considered a hostile and greedy act to the community and nation.

[gsigas]

Why is it that looking for any alternative, other than mass layoffs, to maintain or grow profitability seems to elicit the 'Businesses are not charities' line? Lay offs of talent when a company is profitable, has cash reserves and is out performing competitors is a sign of short term and entrenchment thinking which does not serve a company or shareholders well. Companies like GM followed exactly the model of massive layoffs and plant closures (in the mistaken belief that demand would come back by itself and it didn't need to change just cut costs) and failed. That is simply a bad business strategy for a healthy company with resources, a better strategy is to adapt, retrain, grow and spur innovation. Massive layoffs when you have profit and cash reserves, rather than following longer term strategies of improving your product or expanding to newer markets, is bad (and is exactly the type of thing that leads to another GM).

[SIGHUP]

@gsigas

You are assuming Microsoft did not try to find an alternative. Letting people go is extremely expensive to companies and most do not take that decision lightly. As for GM, read about GM job banking system. See how well it worked for GM to leave people on the payroll that should not be there.

[massfat]

Microsoft has not stopped hiring new people. In fact, they have introduced new positions in various divisions. People are simply focused on this because they think it is big news. Even though Microsoft claims to be eliminating 5,000 jobs over 18 months, they're probably hiring the equivalent over the same period. Furthermore, they mentioned that they would relocate some of the positions.
There have already been job positions listed in various places by Microsoft looking for new talent.

Most companies go on a hiring freeze when there are mass layoffs. Not Microsoft. Like they said, they are restructuring. Although some people will simply not be needed anymore, especially because Microsoft hasn't really done any mass layoffs before, so it's understandable for them to do some restructuring at a time like this.

[Vegaman_Dan]

The outplacement services Microsoft offers are pretty darn good. They give you access to an office space you can use for researching job opportunities, do interviews, continue your education to get another job, and provide on site services to assist in even mundane things like making high quality copies of your resume. You show up on site and they give you office space with a computer, dedicated telephone number, and resources to help you find that next job.

Not too many companies do that for people laid off. Many just hand you your walking papers and wish you luck.

[Random_Walk]

That isn't a bad deal at all. That said, it is still a rather small comfort in the face of coming to "work" and knowing that you're still not getting a paycheck. :/

What I want to know is, do the laid-off employees get a crack at existing openings elsewhere in the company (with or without relocation expenses)? Many of the Fortune 500 do it as a matter of course, but I don;t know if Microsoft does or not.

[loose_screw]

I'm assuming they can apply as external applicants, if not as internal ones.

Chase just sold their national retail lockbox division to Regulus, an Indian company, and the affected employees are not allowed to post for internal Chase positions. It's a pretty crappy deal IMO.

http://louisville.bizjournals.com/louisville/stories/2009/04/27/daily25.html

[Random_Walk]

@loose_screw: Probably correct, though with caveats.

I suspect that contractors cannot simply try to get back in (they have a waiting period of 3-6 months)...

[Hunnter2k3]

Hopefully now they won't be so stupid when it comes to releasing sloppily done OSes (Vista) with stupidly high requirements, while lying to people. (including close friends [Intel])

Shame that hard working people have to suffer because of it. (well, not the GUI team, seriously, did they hire kids for Vista?)

[Random_Walk]

In all seriousness? While yes Vista can take a small part of the blame, I think it is a bit over-reaching to lay all of the blame at the feet of Vista.

If anything is to blame, I would just about dare call it a combination of bad economy and hubris. Microsoft has been casting itself into markets where they had never been before, sinking vast amounts of money into products which have shown themselves to be promising at first, but wound up becoming anchors on the company's growth. The whole time, they have done so with the assumption that they would dominate as easily as they did in the PC operating system and office apps arenas.

Only the XBox, which is even now making only a thin profit, managed to rise above the failure status, but even then it has a long way to go before reaching any form of ROI, if ever. The Zune may have some potential, but the iPod is going to be nearly impossible to overcome (barring any spectacular failures on Apple's part, anyway). Windows Mobile has been a losing proposition for the past five years, if not longer. There are many more areas where Microsoft can jettison experiments gone bad, and focus instead on areas where they do have growth potential (for example Microsoft Dynamics, SharePoint, and the like).

Instead, they continue to focus on high-profile losing products, sinking vast amounts of wealth into projects that basically end up going nowhere.

Maybe it's time they sit down and start trimming the fat off of their project list, instead of on their FTE spreadsheets?

[gp2792]

one correction, msft didn't lie to Intel...intel pressured msft to allow the "Vista Ready" sticker on chipsets that were only vista basic ready. Not a good thing by any measure, but it was Intel that was doing the pushing\lying and msft doing the caving.

[Random_Walk]

About the Intel/Microsoft sticker scandal? Every vendor was putting pressure on Microsoft to confirm their products for the sticker. The difference is this: Microsoft did not have to compromise their standards, yet they did so nonetheless.

It does not matter what the vendor says, it is whether or not you hold firm to your own standards.

If I bought in to a vendor's promises without holding firm to stated RFQ standards, and the product did not deliver for a given project, it is not the vendor who would have to explain the failure to the powers-that-be. So, if individuals routinely have to eat the blame for bad decisions, why should corporations be exempt?

[massfat]

Microsoft has actually been expanding quite powerfully into other markets. Take the Server products for example. Windows Server 2008 was extremely successful and now it's reaping in almost as much as their flagship products (Office and Windows). Xbox has overtaken the PS3 in their market, and is now the leader for the hardcore gamer market. While Xbox didn't beat out the Wii, the Wii has tapped into an entirely new market. Xbox is still winning in the traditional gaming area, and it's becoming highly popular as a multiplayer platform with Xbox Live. Xbox Live is where their real profits will come in from once they get a strong amount of subscribers.
The Zune may not overtake the iPod, but for most real music lovers, the Zune has greater functionality. If some rumors of the ZuneHD are true, it may very well become popular, but perhaps not to the level of iPod.

[ogman]

Yeah, and if the cost per computer of Windows 7 is the same ridiculous price as previous versions of Microsoft OS's, there will be further layoffs. Time for Microsoft to wake up and realize that their place in the market is more fragile than they think.

[massfat]

As if... Windows Vista has had a bad name but it's been highly profitable just like their previous OSes. And besides, Windows computers with Vista nowadays cost like $400. Trust me, I have one, and it runs all my programs without lag issues (by programs I mean graphics intensive FPS games).

[loose_screw]

I bet the initial upfront cost of Windows OS as a percentage of PC sticker price is much lower than that of an Apple desktop or laptop.

[myles taylor]

It's just sad really. Yes, executives are overpaid. I wish we could force them to take a pay cut before laying off workers.

On the other hand, if they had to take a pay cut, they would spend less which probably wouldn't be good either. Oh the catch-22....

[shycelticwitch]

no catch 22 at all here myles... Cutting CEO salary by 50% and distributing it amongst those you might lay off will actually INCREASE spending. Do you honestly think those CEOs shop like the rest of us? When was the last time you bought a yacht or summer house at Walmart!? When people become wealthy, they stop being a part of regular society, and live in an entirely different world than we do. In their world they can close the blinds and not see what a mess they are creating with their greed and indifference.

[msjonker]

Not staying competitive because you are profitable is just plain stupid. If you're making job cuts because you are not profitable, you are acting too late.

The Big 3 didn't stay competitive when they were making money hand-over-fist, and now look at where they're at. These are businesses, not charities.

[gsigas]

I agree, but not staying competitive because you are scared and did a massive layoff of talent, even when you are profitable and have cash reserves, is also stupid. Microsoft is making job cuts, rather than re-tasking or re-training when its competitors are stumbling because it is showing the typical lack of long term vision shown by most U.S. tech companies. Now is the time to take advantage of the cash reserves, size and profitability and start to move into new areas when all competitors are pulling back. The Big 3 didn't risk anything and tried to stay with their old model by doing massive layoffs, outsourcing and plant closures rather than re-investing or retraining in new ideas and now look where they're at.

[msjonker]

That's assuming all the layoffs were of "talented" people. I've had a few jobs and one thing that was common to every single one of them was that there were people who were dead weight and needed to go. I'm not saying that that is the case here, since I have no knowledge of the layoff, but sometimes, layoffs really are needed to clean house.

[Renegade Knight]

The Big three made the mistake of not investing in the long run. The short run thinking caught up to them.

[loose_screw]

By "Big 3" I assume you mean Ford, GM, and Chrysler. I was under the impression that a big part of their problem was union costs, which foreign companies didn't have to contend with.

[mikestatic1]

I wonder how many of the 5,000 total layoffs will be made in low-budget countries like India? I'm sure Microsoft will ensure that most of those laid off are in the United States.

[loose_screw]

I'm sure it's the same with most other companies.

[The_happy_switcher]

The consolation prize brick-sized fruit cake is in the mail for all the newly laid off.

[ccwsoftware]

My first reading of your headline had me thinking that Ballmer himself was on the layoff list. Call it blind optimism or poor reading comprehension, no matter. Imagine my chagrin.

[bwvla]

Its shameful for a company thats still turning huge profits quarter after quarter to be laying people off. Microsoft should suck it up and do its part in helping to ease this recession. If Microsoft was operating in the red like GM then layoffs would be justified, but for them to be operating in deep green and laying off simply shows greed.

[loose_screw]

If there are people or departments within the company that aren't contributing to the bottom line, why shouldn't the leadership get rid of them? Yes it sucks for the people affected, but it's not like everyone at Microsoft is doing the same thing. If they decide to stop making Zunes for example, why keep those people around? I guess they could be nice and try to shift those people into other departments, but maybe those people have such specialized skills that there's not a good fit.

I'm not defending Microsoft here, but any company (even a wildly successful one) is comprised of many different internal organizations. Apple has laid off employees as well, it just hasn't been as widely pulicized because they're a smaller company.

[dennisl59]

I smell BAILOUT from the Taxpayers of the United States of America

[monkeyfun14]

Uhm no.

And with Bill Gates having 50b+ in the bank i'm sure if MS ever needed a bail out he would provide it.

[aphoog]

I am sure everybody on this forum has a job and knows pretty well that every company has lot of extra weight. more so the companies that have the scale of microsoft. Recession is an excuse to shed that weight and companies use it to their advantage. During the good times people just hire without thinking... those positions are usually the first ones on the chopping block. ....there is a human cost to this but to blame it on a CEO is stupid.
@gsigas Are you telling me that you will not cut expenses at home if your salary is reduced by say 10%? because you still have some money in the bank? And we ask how we landed into this economic crisis?

[gsigas]

@aphoog In personal terms the analogy of a profitable (and cash reserve rich) company laying off massive numbers (not a few dead wood employees here and there, we are talking mass layoffs) as opposed to innovating or looking for alternatives to make more money rather than just cut costs would be like responding to a 10% pay cut simply by spending less eventhough you currently have enough income to absorb the 10% cut. In the long run you will fail, there may be more and more pay cuts coming and at some point you will not be able to absorb them by cutting costs anymore (this is a losing long term strategy, it is foolish). In personal terms a better response would be to develop alternative sources of income or seek further education to switch sources of income while you still had savings and extra money (i.e. profit and cash reserves) and it was still an option rather than cut costs and simply hope that the old income source will bounce back by itself.

[MMC Racing]

@gsigas - let me guess, no business degree right?

[aphoog]

@gsigas
You cannot accuse microsoft for the not trying....i doubt they are sitting still and waiting for the "bounce back".... they have their hands and feet in everything..... is that why they are losing money? maybe....but eventually they will hit the jackpot (at least that's what they think?)....
and if you read Ina's other post they are hiring 3000 people in "growth areas" ....looks like they have thought about this more than what the comments in this forum suggest
Microsoft wrongly gets blamed for not innovating.... they just have not released a blockbuster in recent times or in some cases not given enough credit.... and sometimes you don't need to be the first in the market..... identify a successful product, make a good enough alternative and build on it..... something microsoft does very well

[msjonker]

@aphoog I agree with you 100%. People really get angry when companies lay off during "good" times, so most have no alternative but to lay off the people that needed to go a long time ago during a downturn. If people didn't get so up-in-arms over people losing jobs, there wouldn't be mass layoffs like this. A few people would be laid off here and there. But with all the red tape and bad press companies have to go put up with, this is the only alternative. No wonder American businesses are so screwed up...

[Ted Miller]

I believe they are anticipating the demise of Windows 7...

[jmoller99]

I like Steve Balmer and like the way he runs things - Of course I don't use Windows any more than I have to, and won't buy any product that is from 'Microsoft'. Keep up the good work - It makes OS X and Linux look better all the time.

[loose_screw]

Good for you. Unfortunately for Apple, most consumers can only afford to buy products with MS operating systems. I don't see MS going away anytime soon.

[daviddohoney]

It would be hard if Balmer had his job eliminated. Is Bill Gates going to give welfare to his unemployed workers like he does on his African projects or is he going to outsource?

[shycelticwitch]

RIght on! That comment hit the nail right on the head. CHARITY BEGINS AT HOME.