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Microsoft Plans Shift in Business, Thousands of Layoffs

As expected, Microsoft announced layoffs last week, a rare event in the company’s history. The actual scale – 5,000 Microsoft employees and as many as 5,000 contractors – seems to have shocked analysts and reporters so much that they ignored a few salient facts.

Microsoft shed 1,500 employees at the time of the announcement and plans to lay off 3,500 more over the next 18 months. But, during the same period, CEO Steve Ballmer said in a staff memo the company will add 2,000 to 3,000 new positions for its new initiatives, many of which are focused on cloud computing, applications that run in a distributed fashion over the Internet instead of being housed on individual personal computers or servers.

Even more specifically, insiders are claiming that the majority of the first cuts are in the Xbox, Zune, and Windows Mobile divisions of the company, according to veteran Microsoft reporter Mary-Jo Foley.

We have no word yet at TidBITS as to whether any Macintosh Business Unit staff have been let go. The MacBU develops core business and communications software for Mac OS X, such as the Office suite.

It’s well known in the Seattle area that Microsoft has a penchant for hiring and no talent for firing. Very few people are involuntarily separated from the company headquartered in Redmond, WA, even after they’ve committed egregious blunders or exhibited total and complete incompetence. (Theft is another matter.)

As a result, Microsoft employs a lot of people that don’t contribute directly to the company’s bottom line. The areas that Ballmer said would be cut were largely support staff: IT, human resources, marketing, and so forth, rather than the muscle and sinew of the company, its core programming efforts.

It’s never a good day to lose one’s job, and one hopes that the most competent and able folks will be able to shift within the company to the new positions opening up.

And, by the way, Microsoft made $4.2 billion dollars on $16.6 billion in revenue in the last quarter, and has $20 billion in the bank. These moves are expected to save them $1.5 billion a year in expense and $700 million in capital spending.

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