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Economic Downturn: Response
From: Steve Ballmer
Sent: Thursday, January 22, 2009 6:07 AM
Subject: Realigning Resources and Reducing Costs
Sent: Thursday, January 22, 2009 6:07 AM
Subject: Realigning Resources and Reducing Costs
In
response to the realities of a deteriorating economy, we're taking importa=
nt
steps to realign Microsoft's business. I want to tell you about what we're doing and why.
Today
we announced second quarter revenue of $16.6 billion. This number is an
increase of just 2 percent compared with the second quarter of last year and it is approximatel=
y $900
million below our earlier expectations.
The
fact that we are growing at all during the worst recession in two generati=
ons
reflects our strong business fundamentals and is a testament to your hard work. Our products
provide great value to our customers. Our financial position is solid. We =
have made long-term investments that continue to p=
ay
off.
But
it is also clear that we are not immune to the effects of the economy.
Consumers and businesses have reined in spending, which is affecting PC shipments and IT
expenditures.
Our
response to this environment must combine a commitment to long-term
investments in innovation with prompt action to reduce our costs.
During
the second quarter we started down the right path. As the economy
deteriorated, we acted quickly. As a result, we reduced operating expenses during the quarter by $=
600
million. I appreciate the agility you have shown in enabling us to =
achieve this result.
Now
we need to do more. We must make adjustments to ensure that our investments
are tightly aligned with current and future
revenue opportunities. The current environment requires that we continue to
increase our efficiency.
As
part of the process of adjustments, we will eliminate up to 5,000 position=
s in
R&D, marketing, sales, finance, LCA, HR, and IT over the next 18 months, of which 1,400 will oc=
cur
today. We'll also open new positions to support key investment areas during this same period of time. Our net headcount=
in
these functions will decline by 2,000 to 3,000 over the next 18 months. In addition, our workforce in support, consulting,
operations, billing, manufacturing, and data center operations will contin=
ue
to change in direct
response to customer needs.
![](3D"slide0069_image002.jpg")
From: Steve Ballmer
Sent= : Thursday, January 22, 2009 6:07 AM
Subject: Realigning Resources and Reducing Costs
Sent= : Thursday, January 22, 2009 6:07 AM
Subject: Realigning Resources and Reducing Costs
(contin=
ued)
Our
leaders all have specific goals to manage costs prudently and thoughtfully.
They have the flexibility to adjust the size of their teams so they are appropriately matched to r=
evenue
potential, to add headcount where they need to increase investments in order to ensure future success, and=
to
drive efficiency.
To
increase efficiency, we're taking a series of aggressive steps. We'll cut
travel expenditures 20 percent and make significant reductions in spending on vendors and
contingent staff. We've scaled back Puget Sound campus expansion and reduced marketing budgets. We'll also reduce costs=
by
eliminating merit increases for FY10 that would have taken effect in =
September of this calendar year.
Each
of these steps will be difficult. Our priority remains doing right by our
customers and our employees. For employees who are directly affected, I know this will be a diffi=
cult
time for you and I want to assure you that we will provide help and suppor=
t during this transition. We have established an
outplacement center in the Puget Sound region and we'll provide outplaceme=
nt services in many other locations to help you find =
new
jobs. Some of you may find jobs internally. For those who don't, we will <=
/span>also offer severance pay and other benefits.
=
The
decision to eliminate jobs is a very difficult one. Our people are the
foundation of everything we have achieved and we place the highest value on the commitment and hard=
work
that you have dedicated to building this company. But we believe these job eliminations are crucial to our ability =
to
adjust the company's cost structure so that we have the resources to drive=
future profitable growth. I encourage you to attend
tomorrow's Town Hall at 9am PST in Cafe 34 or watch the Webcast.
While this is the most challenging ec=
onomic
climate we have ever faced, I want to reiterate my confidence in the stren=
gth
of our competitive po=
sition
and soundness of our approach.
With
these changes in place, I feel confident that we will have the resources we
need to continue to invest in long-term computing trends that offer the greatest opportuni=
ty to
deliver value to our customers and shareholders, benefit to society, =
and growth for Microsoft.
With
our approach to investing for the long term and managing our expenses, I k=
now
Microsoft will emerge an even stronger industry leader than it is today.
Thank y=
ou for
your continued commitment and hard work.
Steve <=
/span>
Job Cuts Announced: January 26, 2009
Caterpillar 20,000 18%
General
Motors 2,000
Sprint
Nextel 8,000
Home
Depot 7,000 2%=
3;
Pfizer 8,000
Job Cuts Announced: January 22, 2009
Intel 6,000 7%
Microsoft 5,000
2.6
million became unemployed in 2008 (most since 1945)
533,000
jobs lost last month (worst in 34 years)
7.2%
in December (highest in 16 years)
![](3D"slide0068_image004.jpg")
Income Statement
Get Income Statement for:
All numbers in thousands
![](3D"slide0003_image007.gif")
![](3D"slide0003_image008.gif")
![](3D"slide0003_image010.jpg")
![](3D"slide0002_image011.gif")
![](3D"slide0002_image013.jpg")
12/31/08
$16.6 B
=
+ 2%