Layoffs
5:00 am
Fri July 18, 2014

Analyst: Microsoft CEO 'Seizing The Moment' Restructuring For Mobile World

More than 1,300 Microsoft employees in the Puget Sound region got their pink slips Thursday as part of announced cuts to the worldwide workforce that could total 18,000 by the end of the year — the biggest in the company’s history.

But some analysts say the massive layoffs bode well for Microsoft’s future.

About two-thirds of the cuts are related to Microsoft’s recent acquisition of Finnish cell phone maker Nokia.

Analyst Patrick Moorhead says Microsoft had to buy Nokia, because it was the last high-volume manufacturer of phones running on Windows software, and it was struggling.

“And if they had lost Nokia to let’s say Android, it could have been game over for Windows phone,” Moorhead said. 

But in addition to the cuts overseas, the company is streamlining its ranks at home and getting rid of middle managers.

Merv Adrian, who covers Microsoft for Gartner, says the layoffs signal a new era under CEO Satya Nadella, who is anything but complacent.

Here's a highlight from Nadella's first town hall with employees, during which he told them, "This business does not really respect tradition; what it respects is innovation on a go-forward basis."

“They no longer feel that it’s about fortress Microsoft, circling the wagons and keeping everybody on Windows. That will not work anymore, and they get that,” Adrian said. 

Adrian says Nadella is aggressively moving the company into cloud-based and mobile computing, and restructuring Microsoft to make it happen. And the layoffs aren’t the only aspect of this strategy. Adrian attended a big worldwide Microsoft Partners conference earlier this week inWashington, DC.

“The talk there was about the places Microsoft in investing, hiring new people, creating new positions and funding new programs. So both things are going on simultaneously,” he said. 

Adrian says nobody likes layoffs, but they’re more about Nadella seizing the moment of his new position than about weak balance sheets.

Whether the move in fact lays the groundwork for a positive future should be clearer by the end of the year.

More cuts are expected. Additional details should emerge as the company releases its earnings next week and Nadella faces employees in a monthly Q-and-A session at Microsoft on Friday.