9 ms·
If Microsoft is doing so good why layoffs?
Microsoft released earnings yesterday and showed excellent perf on all fronts. Why do 10k layoffs then?
- jleyank 3y agoProbably because everybody else is. If they've over-hired, they can fix matters a bit or if they're very good/careful with HR they can prune some deadwood. Or, it's just part of the plan to break the back of the WFH movement, thus removing worker agency.
- ClumsyPilot 3y ago> Or, it's just part of the plan to break the back of the WFH movement, thus removing worker agency. Put the peasants in their place - business justification is just rationalisation
- musicale 3y agoThis is an interesting take. Basically an authoritarian crackdown to shut down a nascent worker rebellion before it really takes off.
- cronin101 3y agoAs someone working at Microsoft I can actually say that they have continued supporting WFH and if anything are actually leaning even heavier into WFH-facilitation (at least in my division) lately. It’s been a big success for enabling cross-office cooperation and is seen as a pretty valuable differentiator vs SV-corps. I believe for the longest time, even when the stock and comp wasn’t so hot, Microsoft had a reputation for “the place with with work-life balance”.
- jleyank 3y agoI hope this is true. I also hope that any company bringing jobs that could be WFH into commuter-land again would STFU about climate actions. Unless their staff is walking to work, they're wasting time and stressing the environment so people can be seen rather than be effective.
- musicale 3y agoThat sounds great actually - I hope it continues.
- mpol 3y agoIt is not doing that great really, it just sounds like it. Sales was up 7% last quarter, profit 9%, but inflation is 10% year-on-year. So Microsoft is effective losing value.
- bagacrap 3y agoInflation is ~5% yoy
- JumpCrisscross 3y ago> Sales was up 7% last quarter, profit 9%, but inflation is 10% year-on-year. So Microsoft is effective losing value. To illustrate, suppose they sold $100 last year, or $25 per quarter. That means they sold $26.75 last quarter [a], of which $2.41 was profit [b]. Last year it was $2.25 [c]. Inflation means last year's profit bought as much as $2.48 today [d], i.e. real profit is down 3%. [a] 25 x 107%* [b] 26.75 x 9%* [c] 25 x 9%* [d] 2.25 x 110%*
- pcthrowaway 3y agoUnless they're giving their employees annual raises that match inflation, this doesn't really seem like an explanation for layoffs, as the salary for their employees also declines in inflation-adjusted numbers. If they are giving employees raises that match inflation, I wonder if they've decided that some layoffs while keeping the raise structure the same is better for morale than no layoffs but turning the annual raise percentages down a bit.
- JumpCrisscross 3y ago> wonder if they've decided that some layoffs while keeping the raise structure the same is better for morale than no layoffs but turning the annual raise percentages down a bit Your competitors will pay real market for your best employees. Better to trim than spread the pain.
- amf12 3y agoBut that is just growth over previous Q/Y, so yes, they are losing value, but that is because of the increased costs due to inflation, and decrease in expected revenue due to inflation. Their margin is still above the inflation. I wouldn't say they aren't doing great for the current economic conditions. Layoffs though, are due to increased interest rate, which kinda correlates to losing value.
- gcheong 3y agoIt sounds good to the shareholders.
- sitkack 3y agoAll supplies a source of wage suppression pressure. It has zero to do with the savings from the fired worker.
- musicale 3y agoIt really does look like tacit collusion among tech companies to reduce wages.
- mcast 3y agoIt seems like collusion to appease the Fed to stop increasing rates.
- sitkack 3y agoInterview with Larry Summers, Former Secretary of the Treasury | The Problem with Jon Stewart https://www.youtube.com/watch?v=tU3rGFyN5uQ https://www.youtube.com/watch?v=tU3rGFyN5uQ
- mcast 3y agoJon Stewart is an incredible interviewer, he was able to expose Summers praising billions of dollars of corporate profits while completely disregarding people losing their jobs in almost the same sentence.
- giantg2 3y agoProbably just taking advange to strategically cut underperforming products and possibly individuals.
- sbdaman 3y agoThe business case for lay offs doesn't necessarily require a deficit/net loss.
- Someone1234 3y agoLarge companies over-hire to short-term inflate the share price, then lay-off the over-hire to also short-term inflate the share price. In essence, you take the market sentiment and hire/fire in order to reinforce it. e.g. "Outlook is good, we're in a hiring cycle because we want to take advantage of the positive market conditions." "Outlook is bad, we're in a layoff cycle because we want to protect ourselves." Shareholders love both since the company is being "efficient." Only one who loses is the little employees (and, frankly, long term stability; but modern US businesses only have foresight to the end of the current FY and only memory of the last FY).
- michaelbrave 3y agoSounds similar to Hawthorne effect to me, where they sudied office workers on how they reacted to dimming or raising the lights and both caused upward productivity but it was because the workers realised they were being watched not because the lighting caused changes. Neither the hiring or the firing necissarily make the company more efficient but maybe being watched and knowing they are being watched does.
- skywhopper 3y agoThis assumes layoffs are actually done using some logical process. But everything I’ve heard about the folks who have gotten let go says otherwise. No one is being fairly rated. So no one will assume they are being “watched”.
- tester756 3y ago>Large companies over-hire to short-term inflate the share price src on that?
- hudsonjr 3y agoI don't know that they hire to inflate the share price. In good times, I have felt like that some R&D projects exist just to say "we have people working on it" for investor calls and such. In bad times, those things can get cut.
- musicale 3y agoPerhaps one or more of the following: 0. They want to reduce labor costs in the short term. 1. They think some projects will not produce value in the near or long term, so they are canceling those projects and laying off the people who work on them. 2. They want to reduce salaries in the near and long term. (Fire at high salary, rehire at low if needed.) 3. They got a big tax bill due to the changes in R&D amortization. 4. They believe they can automate existing jobs and/or replace them with AI. Layoffs usually destroy business value.[1,2] In this case I expect MS might be betting on reduced labor costs (including taxes) in the short term followed by salary reduction and automation in the near and long term. [1] https://hbr.org/2022/12/what-companies-still-get-wrong-about-layoffs https://hbr.org/2022/12/what-companies-still-get-wrong-about... [2] https://www.inc.com/nick-hobson/according-to-this-stanford-professor-mass-layoffs-destroy-businesses-why-are-they-still-happening.html https://www.inc.com/nick-hobson/according-to-this-stanford-p...
- gumballindie 3y ago> 4. They believe they can automate existing jobs and/or replace them with AI. Yawn. It's more about disciplining the workforce.
- musicale 3y agoIt's always about disciplining the workforce. This doesn't necessarily serve the bottom line, but it does serve the status hierarchy, and we all know who is in charge. But the question is: why now? Is it because workers are having more autonomy from working at home, etc.? Is it because they fear unionization or some sort of worker rebellion? And what reason is there to believe that automation won't continue to happen, as it has for the past 40 years for a variety of office jobs?
- gumballindie 3y agoAutomation will continue to happen, but what you are seeing now is due to a mix of reasons unrelated to a chat bot. Over hiring, inflation (suddenly not a main topic, was replaced by ai scare mongering it seems), bad politics, interest rate hikes, crappy products, and a handful of other reasons, none of which are "ai".
- xyzzy4747 3y agoSome people produce less value than they cost.
- yellowapple 3y agoThis explanation assumes that Microsoft is accurate in its assessments of value.
- xyzzy4747 3y agoThey just have to be accurate enough on average with room for error. If they fire 90 unproductive workers and accidentally 10 productive ones, it could still be a net positive for the company, just on a financial level (morality aside).
- yellowapple 3y agoIt could be, but it's notoriously hard to predict. Those 10 productive workers could join (or form) a competitor and result in far more damage to revenue than was saved in labor costs across all 100 of the laid off workers, for example.
- xyzzy4747 3y agoEverything in business is very difficult to predict and it's the realm of gut feelings and vague probabilities. Executives just make the best decisions they can.
- yellowapple 3y agoI guess the problem is that "best" depends on perspective.
- xyzzy4747 3y agoEveryone has a different perspective, but at the end of the day, some companies do better or worse than others to the benefit or detriment of the shareholders.
- badpun 3y agoBecause they believe they'll make even more profits if they lay off those 10k people. Or, at least, that's what the owners (i.e. the current stock market sentiment, the board of directors) believe, and the CEO follows their tune.
- gt565k 3y agoBecause they’ve identified poor performers or products / teams that no longer fit the strategy or market and need to be shut down. The answers on here are ridiculous. Flip the question on its head - why did Microsoft hire like 30-40k people the last 3 years? Because they were staffing for projects and teams. Some projects got shutdown so the teams / staff is no longer needed.
- refulgentis 3y agoThat’s sort of a head-in-the-sand answer, there weren’t these big projects that needed to be staffed up through mid 2022 and cut by end of Q1 2023. I’m sure we can come up with one, maybe? But certainly doesn’t describe what happened
- gt565k 3y agoIt’s all speculation and rumors unless you got insider knowledge of how the layoffs were organized specifically and the motivation behind them. How would you know what their strategy and goals were before and after layoffs? Like I said this complaining of layoffs is ridiculous. Most qualified people have no problem finding a job. I could get fired and have multiple offers within 2 weeks. Get so good they can’t ignore you and network to make sure people know how good you are. it’s really no different than this personal example: I hired a lawn scaping guy after dealing with leaves and bushes by myself. The guy did a decent job the first time he serviced the yard. The subsequent times he showed up for 15 minutes trimmed the tiny grass area in front of my house and left, when he was supposed to do much more. I caught him on the ring camera and after 2-3 times of him coming by for just 15 mins to hit the yard with an edger and bill me $100 , I fired him. Then I bought the tools and did my own yard work for a few months. I got tired of it and saw my neighbor had a hard working guy maintaining his yard. Got that guy hired and now I don’t do my own yard work anymore and the guy I hired is cheaper and more thorough when he does my landscaping.
- websitejanitor 3y agoThe base interest rate has gone up. Businesses don't pay for costs solely with revenue, they also use cash from loans. Revenue is used to pay off loans, so higher interest rates mean loans become more expensive. To maintain constant loan repayment costs through a projected year, the total amount of those loans has to go down. With lower cash from loans, costs have to be cut and payroll is one of them. I think this partially explains why everyone is doing layoffs regardless of revenue performance: they all have to adapt to the same conditions of higher interest rates.
- jalino23 3y agomicrosoft needs loans?
- sarlalian 3y agoNeed? No. But they can invest cash on hand into things that have a higher yield than the base interest rate, and operate the business using loans at the base interest rate.
- rwmj 3y agoCashflow is hard ... On the one hand you must pay 200,000+ employees everywhere in the world at regular intervals without fail. But on the other hand, the cash to do that is tied up in various places, it's in a different country, it's in various interest-bearing bonds or shares that cannot be redeemed quickly, or it's even in future revenues that you've not received yet. And it wouldn't be efficient to have a massive cash float on hand in country-specific bank accounts, when that money could be invested profitably.
- ChatGTP 3y agoMust feel nice to be so valued.
- websitejanitor 3y agoYes. It's actually uncommon for a business not to take loans out. You can see how much a public company owes in the balance sheet: https://finance.yahoo.com/quote/MSFT/balance-sheet/ https://finance.yahoo.com/quote/MSFT/balance-sheet/
- Nasreddin_Hodja 3y ago> If Microsoft is doing so good why layoffs? Because it is doing better than those layed off.
- PeterStuer 3y agoIf you fire when others are hiring. You will be seen as in trouble and sentiment will be negative towards you risking stock price, investment and loss of key persons you did not want to lose. If you fire when everyone else is firing it is just part of the meta cycle and it is business as usual. Overhiring is natural as a combined consequence of broad panning for best hires, preemptive competition squeezing and empire building relying on fresh young unthreathening meat.
- weatherlite 3y agoCos they can. They feel like employees have lost their power and this is a good time for them to shed costs and show who's boss. It's very shitty but this is capitalism, the stock price will only go up with such moves due to "efficiency".