The Microsoft Layoffs

Microsoft nokiaIn 1995 Bill Gates wrote, “The Internet is a tidal wave. It changes the rules.”  That memo was all too correct.

The consequences of Steve Balmer’s failure to rise to the challenge are now in the hopefully agile hands of  CEO Satya Nadella.   Nadella was expected to lay off five or six thousand people largely to correct for the 25,000 people who became Microsoft employees when Mr. Balmer made the decision to buyout the failing cell phone company, Nokia  .. a company then run by Balmer’s protégé Stephen Elsop (now a current high level MS exec) .
 So there was a shock when Nadella announced he was  firing 18,000 people over the next year. This amounts to  14 percent of the current overall labor force … including 12,500 from Nokia.  The other 5500  go well into Microsoft’s own people and suggest a major change in Microsoft’s strategy is underway  that goes beyond correcting one Balmer blunder .
 Liam Tung  of Zdnet sees Nadella’s comments as a plan to make MS more  able to compete with startups.  I do not believe this.  The creative destruction of startups only works because of the huge failure rate, the inflated value of  VC investments and the promise of IPOs.  Buying or even creating an app like Yo! (an app whose only purpose is sending the eponymous greeting to friends) would at best give MS stock a brief period of luster.  (Yo! netted a $1 million investment after going viral.)  Other IT corporate giants seem to me to be making just this mistake … building their value by buying what is new and. shiny.  Yahoo paid $1.1 billion deal for Tumblr, a blog site aimed at youth.  Google acquired Titan Aerospace, a drone manufacturer and Boston Dynamics (robots) and Nest, a designer of smart thermostats and fire alarms.  Together, these purchases suggest that Yahoo and Google have become overly rich VC firms.
This venture capital strategy contrasts with Apple and IBM’s recent announcement that they have partnered up.  For Apple to sell its overpriced devices, toys like iPADS and Airbooks, companies need  those pricy devices to add more than the Windows based machines.  Imagine IBM corporate reps carry iPADS and selling Airbooks.  Imagine IBM’s Jeopardy-winning Watson speaking to users with the persona of Siri!
Management reshuffles designed to create more gimmicky breakthroughs will not do the trick .
Nor can Nadella just please investors.  While Microsoft stock jumped 3.8 percent to a 14-year high, the Market is a frothy place whereshort term changes do notreflectlong term success. Nadella clearly sees his job aslong term.   “We will create more natural human-computing interfaces thatempower allindividuals. We will develop and deploy secure platforms and infrastructure that enable all industries.”  The plan is to place MS at the center of a cloud operating system whereindividuals use that cloud continuously from home or office.Microsoft has already lost initiatives that challenge Microsoft’s role at the core of corporate and government operations.  Facebook is a great example.  Coming out of  nowhere Facebook has assembled over a billion users who see FB as a new form of user to user communication .. an almost irreplaceable norm if you are goingto function in society.  The Facebook community is a threat to Microsoft’s core business because business people bring FB into the workplace much as they once smuggledVisiCalc on puny AppleIIs because the little machines made calculations a lot easier than what was offered by the corporate mainframes.


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