Microsoft preparing for big round of layoffs - report

I worked in the Microsoft Game Studio for 8 years. Lots of great friends and memories. I wish them the best of luck how ever it turns out.

I have a friend who knows two people who work customer service on XBL and they've not been happy campers these past few weeks because rumblings about possible staff cuts have been rolling around for a little while. We'll see what happens, I suppose.

Microsofts corporate culture created excess middle management ripe for the cull and another tranche of employees spending time sabotaging their competition/colleagues instead of productive work. The post Ballmer MS was about changing that culture as much as anything and it was easy to see a clear out of deadweight was overdue. 30k unwanted Nokia staff is just the excuse they needed.

The gaming side of MS was traditionally very different and there's a good chance it will be hit less. But the scale of change MS needs means a lot of people are going to get hurt and unfortunately plenty of them won't deserve it. This train wreck has been building for a long time.

There's really not much point of me commenting on a story about a company that I don't work for... especially when it seems a majority of user posts are tending toward the negative. But as I've worked closely with Microsoft this last decade on projects spanning Xbox, mobile and MSN Games platforms I feel compelled.

First, the producers, directors and creatives that I've had the pleasure of working with have been in large part brilliant and highly passionate. Yes, MS culture has hindered innovation in recent years, but Nadella is running that culture through a shredder (including the inhibiting review structure). It's not my place to go into details, but a close friend of mine who went through the MS hiring process several years ago just returned to MS this week and had orientation yesterday. She called me to say the rhetoric and atmosphere was night and day from her prior orientation - and she told me this while touring her group's Make Space... which seems rather unusual for someone hired into information security... at least unusual for MS.

Personally, I am excited about the recent movement and trends in Microsoft. Just a little positiveness from a non-fanboy.

seems a majority of user posts are tending toward the negative

Yeah we are silly like that, when a company posting record revenue and profits decides to reward that same work force that created those record revenues with not a thank you but rather pink slips, yeah we tend to get a little negative.

But you go ahead and get excited, if that is what having people lose their jobs does for you...

@Todd
While I'm sure there will be many people out of a job who didn't deserve it, this is what happens when an out of touch CEO (Ballmer) hires a ton of wasted staff to try and get too "corporate," for lack of a better word. Nadella is streamlining the company, like he said he would.

As for 30K people sitting around doing nothing, no one's talking about 30K layoffs. The Nokia people do have jobs to do. Chiefly, they run Nokia. But I'm sure a lot of the functionality of some of the Nokia positions is already adequately covered by MS employees who were already there.

Option 1: Keep both positions even though one of them is unnecessary.
Option 2: Cut the Nokia hire (likely to happen)
Option 3: Cut the MS employee who's been with the company for years

None of those is particularly pleasant, but it's an unfortunate reality of life that there isn't a last-minute Option 4 like in the movies.

Best of luck to those who're out of their jobs. Hopefully y'all can bounce back quickly.

Edited 1 times. Last edit by Nick Wofford on 16th July 2014 11:15pm

Nick, what part of record revenue and profits dont you get? If the company was floundering, if they were taking losses, etc Ok I understand, but thats not whats happening, 8 billion in profits from the 4th quarter alone, ... and please save your 4 options, in the real world there are many many many more options than those you point out.
Plus if you even bothered to read the articles you would know the layoffs are company wide, not just the nokia division.
For those of us that have been around the block a few times, this is all too familiar, and now all too common, its all about and caused by one thing.. greed.

http://www.extremetech.com/computing/175350-microsoft-delivers-record-revenue-profits-due-to-strong-xbox-windows-phone-and-commercial-sales

Edited 3 times. Last edit by Todd Weidner on 16th July 2014 12:01am

"I want us to be comfortable to be proud of Xbox, to give it the air cover of Microsoft, but at the same time not confuse it with our core."

What the hell is he talking about? Apart from the Xbox One's early blunders theres no reason why Microsoft shouldn't be proud of the Xbox brand. As far as the core is concerned, the Xbox brand gives them several oppurtunities for productivity of content, in games, tv, music, etc. It sounds to me like he's looking for reasons(even if he has to make them up) to drop the Xbox brand. Streamlining I can understand but dropping it altogether doesn't seem very practical.

@Todd: "Nick, what part of record revenue and profits dont you get?"

What part of $10bil of that $8bil profit coming from commercial licensing isn't ringing alarm bells for you? A division holding a de facto monopoly in it's market. MS also rearranged their reporting structures again to confuse deeper analysis - as they unsuccessfully did to massage Win8 launch sales. MS is a lopsided business, is in markets where they are either already failing or can see that market shrinking for external reasons. At $8bil/quarter it might take years to die but die it would without change.

@Paul Jace: "What the hell is he talking about?"

Relative to the most successful divisions, XBox is a failure and I suspect too many inside MS have toxic views about it. Outside MS XBox is a distinct brand from MS. I read a lukewarm hint to insiders to respect the brand more, having supposedly already decided to keep it. As a supporting part of the bigger corporate plan they couldn't really drop it anyway though.

(relative to Bing its a screaming success of course ;)

Edited 1 times. Last edit by Paul Shirley on 16th July 2014 10:21am

@todd I wasnt saying MS has 30.000 people around doing nothing but 30.000 people moved from Nokia to MS under the mobile phone deal. Now that is a lot of people to be paying monthly salaries to, and seeing as the phone business wasnt very profitable for nokia in the last few years it certainly wont be very profitable for MS right at this moment, and certainly with inenvitable overlaps in organisations there is only one solution -->layoffs

Ofcourse Microsoft will be looking at streamlining company wide, thats what companies do constantly. And you also say the cause is greed....well companies are greedy, thats their function. Their first and foremost liability is towards investors, and investors care about profitability and return on investment. Sad to say but thats how it always will be.

Average wages first started to fall behind productivity increases in the early 1990s, Some of this squeeze follows from long-term changes in our economy. Over the last few decades less of what our economy produces has been paid out in wages and more in profits to owners and shareholders. But this is only a small part of the story. Those at the very top of business have also gained a much higher proportion of the wage bill than middle and low earners.

Since the late 1970s wages have grown almost twice as fast for the top 10% as they have for those in the middle. Since 1979, 22p of every extra pound earned has gone into the pockets of the best paid 1%. This tiny fraction of the workforce now takes home more than 14% of all earnings, up from 6% in 1979, ok those are uk figures, but they are equivocal to US ones, we had thatcher you had Reagan both helped do the same thing , Average chief executive remuneration in FTSE 100 companies rose from 11 to 88 times the average wage between 1980 and 2011. It's been a long time since rising profits have resulted in above inflation pay rises for ordinary employee's of companies, if you want to know where this money has been re-directed look to the top, it dont hurt this situation that those at the top set the strategy and the pay.

It's all about short term gains and executive pay rises, some of these folks earn enough to keep hundreds employed, the top paid ceo in america's salary alone(according to wikipedia) is sufficient to employ 962 people paid 100,000 usd a year, its all about the culture, that encourages such things to happen, problem is greed to the excess kills the company, prioritising short-term over long term, pay peanuts get monkeys, if anyone's ever had a problem with anything from a major company before, you'll be well aware that its mostly monkeys when you try to get it sorted, you waste half the time putting the phone down on the idiots in the hopes next time you ring you might get lucky and find one with half a brain.

Indeed the fact that the average person earns so much less today then they would have done had things continued prior to the current trends contributes to the many domestic manufacturing woes and issues companies that ultimately hawk products to consumers face, car companies are a prime example of this, though one of many, we have a consumption based economy but the majority of the population cannot afford to consume, instead more and more wealth is generated purely in financial services, basically making money out of nothing, people forget money is only a concept and doesn't actually exist, that $20 note in your pocket is just a piece of paper with some drawing on it, its only worth what others decide its worth, global society is focused less and less on reality and real products and more and more on imaginary ones, to the detriment of all, i'll be honest the south park episode "Margaritaville" seems to outline a global economy based on more sensible principal's then are actually in effect, at least the headless chicken essentially works on random chance, not deluded self-interest.

One could elude as a result that society has gotton more and more demented, and living in imaginationland as time goes on, and now is a full on loon, theres a global expectation of a constantly expanding economy, with no benefits to this being received by ordinary people, infact they've got less money and less job security in the intervening time to show for all their efforts, and well I cant think of one good reason why in societies whose population rise has nearly halted their economies should be expanding, they're not making more stuff or selling it to more people, more people aren't generating more economic activity, its the same number of people, producing less stuff domestically then ever before with lowering real world incomes but somehow economies are rising... yup, society is well crazy, and it'll all end in tears, MS is just following the same corporate culture that is in the world over.

I seriously doubt microsoft of all companies will be the one leading any change in said culture, no offense to MS implied, change has to happen at a societal level, which starts with the attitudes of the ordinary people, as long as they "buy" the whole trickle down thing then nothing will change, despite all the proof the only thing that trickles down is the drip of the end, a great number of people, still believe in it, as a result members of the society have only themselves to blame. In reality most people have no idea how the global economy works, how stock markets function, how money is generated, and so on, and in their ignorance there all the more easy to fool by those with vested interests in keeping them fooled.

Edited 10 times. Last edit by Alexander McConnell on 16th July 2014 2:14pm

@Todd
Don't be vague about it. If there are "many, many, many" options for the company, then name these options. But I'm willing to bet that they'll just be permutations of the 3 that I listed.

@Paul
I read a great piece on Sony about 5 or 6 years ago that said they dealt with the same thing. A lot of their executives viewed the Playstation as a kid's toy, and were embarrassed that they made it. It wasn't until Kaz made it more profitable than the rest of the company that the attitude changed. I'd imagine MS is going through that now. They've probably got a lot of executives who feel that the company should only be offering professional services to businesses and that's it. Purists, and all that noise. Satya is going to have to convince that chunk of the company that the Xbox (and their other consumer offerings) can be valuable to the company as well.

@Paul Shirley

(relative to Bing its a screaming success of course ;)

True but Bing gets a free pass because it's relative to their overall plans....or something like that. *shrugs*

@Nick

I also read that several years ago too. But like you said, Kaz made the PS1 and PS2 profitable and that changed alot of other execs minds at the time. As for Microsoft, the original Xbox was never profitable and if we were coming from that gen I could understand the companies reluctance to keep the brand. But the 360 was quite profitable for them. Perhaps the Xbox One hasn't been selling as well or as fast as they would have liked it to and some within the company don't think it will ever turn the corner, so to speak.

But I'm willing to bet that they'll just be permutations of the 3 that I listed.

and you would be wrong.People are not limited to one skill set or one job description. Your current job hardly describes and/or portrays all your skill sets and therefore limits.

Their first and foremost liability is towards investors, and investors care about profitability and return on investment. Sad to say but thats how it always will be.

wrong, that whole mindset is not written in stone, actually its taken from one idea from one economist from the 1970s, which has since been called " the world's dumbest idea". Its sad how many people buy into that.

http://www.forbes.com/sites/stevedenning/2013/06/26/the-origin-of-the-worlds-dumbest-idea-milton-friedman/

Edited 3 times. Last edit by Todd Weidner on 17th July 2014 12:06am

Its refreshing to see someone in the comments calling out the bull, and not patting the execs and CEOs on the backs for their forward thinking and brand new ideas (which just happen to involve firing 30000 people) on the off chance some networking opportunity MIGHT come along and their comments on games industry MIGHT come up.

Maybe I'm being cynical here too but I like it when people talk truth and back it up with hard facts. Games are not made by upper management and producers, they are facilitated by them. They are streamlined by them.
Like Todd said, to the execs its all about the numbers. Its just business.

And it sucks when the people in charge of the future of your company are more worried about turning an extra buck than the quality of the games and technology made.

I just can't for the life of me understand how these execs think that creative people can work under the constant threat of redundancy.

But then again, Im not an exec.

@Nick

I think you have a nit of a skewed view., even if your general facts are correct

The issue is that the profitability of the rest of the company fcratered as much as PkayStation getting out of that terrible rut. Now PlayStation is very imoortatn to the company bottom line. Customers, especially in the US buy on price, not quality, hence the ascendency of things like Vizio that if your $1200 TV breaks out of warranty you're SOL. PLUS ADULTS IN Japan don't game like here. There is no "culture of Madden", and among the old guard, the kind of people who sit on the larger Sony board, it's definitely seen as something for children. Think about Fox News's freakouts over Mass Effect, that's a good examplek of the same kind of people in the US.

Dnd don't forget they've lost huge areas of previous revenue. OF CD. CD player sales are in the toilet, No one wants a Walkman (some friends of mine work for Sony Music in Jaoan, they were all given Walkmans, which they then sold and bought iPods). Their proprietary music service went bust, it's the unraveling of a large conglomerate combined with changing tastes, and yes, lowering of standards of what people will buy people will buy a 73" Vizio formthenlast,e price as Sony's superior 60 inch, and since Dony is no longer a brand known for it's bedrock quality that it was in the 80s, there isn't even that anymore. "Made in Japan" used to mean something,

So it's less that their perception has changed, and more that it's a bright spot on the balance sheet raising a lot of leaky boats. And this they cannot ignore, even if they don't respect it. The real question is whether they can keep the cash flow going, since they've blown a pile of money on the launch and securing exclusives. Hopefully it won't come back to bite them if the larger company revenue dips further.

Just announced. 18.000 to go, of which 12.500 are ex Nokia people.

and the stock has gone up almost 10% since the announcement and now execution of these layoffs. Just as I said it would. Its the temporarily blip that allows execs to cash out those options. Its all about greed.