Microsoft goes through another small round of layoffs

Microsoft goes through another small round of layoffs
Microsoft has quietly laid off "hundreds" of workers this week, although the company has not yet made a formal announcement to the SEC or on its Investor Relations website. I heard from a friend of mine who got the pink slip (and a nice package).

Rumors have been building for weeks that Microsoft was poised for another round of good-byes, but the total headcount this time seems relatively small.

In 2009, Microsoft laid off about 5,800 employees, but then turned around and hired about 2,000. Some media reports are trying to connect the Microsoft layoffs with the company's botched mobile strategy resulting in the embarrassing Kin phone and it's even more embarrassing fast failure. But I'm not buying that. The Softie I talked to this morning had nothing to do with Kin. Others say that most of these layoffs are from the sales and marketing organizations, which jives with the first-hand account I heard.

Microsoft is set to announce its fiscal year-end earnings results on July 22. The reduced headcount is a bit of a surprise because Microsoft had a record-breaking second quarter that ended Dec. 31, 2009 and another record-breaking third quarter that ended Mar. 31, 2010, thanks mostly to the popularity of Windows 7 and an increase in mojo for Xbox and Xbox Live. (Recent news reports suggests that Xbox Live will make $1 billion in revenue this year.)

The best reasoning I've heard is that the layoffs are part of a routine restructuring, some kind of end-of-fiscal-year housecleaning. Some say if Microsoft really wanted to be lean and mean, it would cut its workforce by 30,000 or more. I personally don't advocate cleaving the company so harshly, but I can see the rationale for it. Microsoft has over 88,180 employees today, up from about 32,000 at the start of the decade. 53,363 are in the U.S., with 39,738 in the Puget Sound area. Half of the employees are in a "business" group making Microsoft's products, most of the rest are in a group that sell its products, with about 10,000 in overhead-ish operations positions. Do you really need one salesperson for every product person?

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Some Microsoft employees are none-too-pleased with this idea that layoffs are an automatic part of the fiscal year. They say that the current system creates an atmosphere where even high achievers can be punished. If an employee has been meeting expectations, but has been in a role for a long time, and the hiring manager doesn't see further advancement potential within the group, that is reflected on the employees twice-a-year performance review, and is akin to branding the person with a scarlet layoff letter.

Will Microsoft report another great quarter, or are the layoffs a sign that the peak results of 2010 have headed toward the valley?