Things are looking rather grim at Microsoft today, as the software giant announced a major 5,000 employee cut, according to an article by IDG’s Peter Sayer. This news came after the announcement of a rather disappointing second quarter:
The layoffs are being implemented due to IT spending that fell lower than the company’s expectations for the quarter. Microsoft said in a statement that it “acted quickly” to reduce its costs. Microsoft warned that its revenue and earnings for the second half of the year relative to the previous year will be “almost certainly” lower. The company said it can’t provide quantitative revenue and earnings-per-share guidance for the rest of the year due to “the volatility of market conditions.” -Peter Sayer, IDG News Service Learning From Nortel: Many large companies have much to learn from the recent events of Nortel, who filed for bankruptcy protection last week. Organizations with disjunct structures and complexly-integrated business functions need to critically evaluate their overall business structure. Decentralization is becoming a common theme, requiring vertical structures that house functionally different business areas and market lines. Microsoft runs a similar danger to Nortel, in that it claims to have a solution for simply “too many markets.” Strategizing on specific products, services, or business units that perform well is ultimately required given the current economic state of the IT industry. Without this critical self-evaluation, and ultimate specialization, large overgrown companies like Microsoft could potentially bleed financial resources without quickly determining the source of the problem. There are significant lessons to be learned from IT conglomerates in today’s economy. The act of self-analysis, decentralization, and the ultimate importance of specialization is needed to keep afloat given the current circumstances. Microsoft’s swift actions may hurt in the short-term, but ultimately, this is a responsible action to gain control over future cash flow problems. What are your views on this recent Microsoft news? Is Microsoft doomed to become the next Nortel? Why or why not?
