Microsoft Corp. is planning its biggest round of job cuts in five years, people with knowledge of the company’s plans said.
Some of the job cuts will be in marketing departments for businesses such as the global Xbox team, said the people. The European Xbox team is based in Reading, U.K.
The reductions -- which may be unveiled as soon as this week -- will probably be in areas such as Nokia and divisions of Microsoft that overlap with that business, as well as marketing and engineering, said the people, who asked not to be identified because the plans aren’t public. The restructuring may end up being the biggest in Microsoft history, topping the 5,800 jobs cut in 2009.
Microsoft's revenue per employee is about 70% that of Google, and about 38% that of Apple, which means the company needs to be more efficient in deploying its staff and resources. A 10% reduction in headcount ought to be a lower bound, rather than an upper bound, on reductions - unless they can magically move people onto more efficient projects right away.
Bottom line is that Microsoft is a bit bloated.
Microsoft's revenue per employee is about 70% that of Google, and about 38% that of Apple, which means the company needs to be more efficient in deploying its staff and resources.
IT can also mean that Apple and Google are highly overvalued.
@edwardm: I don't know whether Microsoft is bloated.
But as long as a company is profitable, it can be a sustainable source of goods/services for its customers and income for its employees. If such a company is forced to raise its profits because its owners are greedy for more, this can easily result in a loss for everyone: Lower quality goods/services for the customers (at the same or higher prices), less income for less employees, and finally, if the customer and/or employee relationship turns sour due to above changes, the company may loose its business completely, becoming a loss for the owners as well.
I don't think that comparing every company to a few temporarily exceptionally profitable ones is a good long-term strategy.
Microsoft's revenue per employee is about 70% that of Google, and about 38% that of Apple,
Does that factor in sweatshop labour, or have the lawyers in Microsoft just not done as good a job at making sure the invisible labour is at arm's length? And is this revenue counted before or after tax? A couple of these companies don't pay a single, solitary cent for anything they do in Australia - while, at the same time, walking on our footpaths. (Source, please?)
To answer the questions - net income is income after taxes. Other measures include things like days of inventory on hand (and the trend - increasing or decreasing).
Revenue per employee is a simple way to compare efficiency. If 2 companies are the same business areas, and one is producing 2x the revenue per employee there's a clue that one organization is not as efficient as the other. Of course, companies could outsource all their work and have very few employees, creating a high rev/emp value.
Net income, on the other hand, reflects the expenses of production - whether internal or outsourced. Here are the net income/employee figures for Microsoft, Google and Apple: $220,528.75 $239,876.72 $446,228.92
All numbers are calculated from each firm's 2013 SEC Form 10-K filing for their annual finances, which also include their total FTE headcount. Each company reports in different months (e.g. June, Sep, Dec, or something like that) so they do not necessarily align on the same month of the year.
Can a profitable company remain inefficient for the long term? Generally no. When there are multiple competitors, more efficient competitors eventually cut their prices (and/or increase features at the same price). The least efficient firms - and their higher costs - becomes a floor for their own price lowering.
The lowest price a company can charge is determined by their costs (they can go lower and lose money but that is not sustainable). A company with greater efficiency has lower costs and can eventually under price (or deliver more customer value than) the inefficient firm.
Efficiencies can come in different ways. One is a re-organization to put more people on higher valued projects - and to balance resources (and expenses) with the revenue and income from each project. In other words, prioritize towards higher returns on investment.
Some projects with negative or poor return on investment potential, or which no longer fit the firm's strategy, are going to get axed. Can those people get moved on to other projects producing good returns? If possible, sure. But it depends on specific skills and where those can be re-deployed, and if it makes sense to scale up other projects.
This is basic economics/finance/accounting stuff. There's no big mystery to this. Industry analysts and senior executives all look at metrics like these to evaluate how the firms are doing and hopefully identify when they've made mistakes and fix them.
If they don't companies eventually start falling behind - even big ones - and eventually go out of business. Management should have addressed this years ago but didn't and that is part of the reason Steve Ballmer resigned - he said he realized he was the problem and the company needed new leadership.
Layoffs are caused almost always by management having made bad decisions in the past. A frustration for us worker peons is that we seldom see the managers who made the poor decisions losing their jobs.
Net income, on the other hand, reflects the expenses of production - whether internal or outsourced. Here are the net income/employee figures for Microsoft, Google and Apple: $220,528.75 $239,876.72 $446,228.92
Here I see two monopolies (Microsoft in OS field and Google in search field and also now in mobile OS) who use it to make money and just buy government so they won't notice. We also have here super high margins company - Apple. Their margins lie on simple thing - model how phones are sold in US and EU, I mean here tight connections with big mobile operators and contracts. As soon as you will remove this Apple will fall to usual margins in months. And whole picture will change.
they don't companies eventually start falling behind - even big ones - and eventually go out of business. Management should have addressed this years ago but didn't and that is part of the reason Steve Ballmer resigned - he said he realized he was the problem and the company needed new leadership.
I do not agree here. In fact, such MBA like look at the company functions is that lead to disaster.
Updated
Microsoft today announced that it's cutting 18,000 jobs, the biggest round of layoffs in its history, as part of ongoing restructuring efforts. In a release, the company says that Nokia's Devices and Services business, which it acquired for $5 billion last year, will be most affected, with 12,500 "professional and factory positions" expected to go by the end of the year.
As I said 10% was a lower bound, while the industry analysts said it was the upper bound.
Microsoft management, and Nokia's Elop, made a lot of bad decisions in the past. Which sadly results in punishing the workers by laying them off (rather than the managers).
Why is Stephen Elop still on the payroll? His "burning platform" memo at Nokia was right but then he stupidly pre-announced the Nokia Windows Phone long before it was ready. This killed off Nokia's "cash cow", the Symbian OS phone before they had a new revenue stream ready to go. This is a classic dumb move that has killed other companies (the old Osborne Computer for example) - pre-announce a product and kill off your cash cow.
That was stupid and it killed the Nokia phone division.
Elop was then rewarded with huge payments and a new executive position at Microsoft while half of the hardworking Nokia workers get fired.
I do not support how this played out but I am pointing out how the analysis went that led to this outcome today.
P.S. I've been laid off before too. It's not fun.
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