I understand that capitalism requires people that have capital and are willing to invest in stocks. But isn’t it about time that someone talked about INVESTOR responsibility.
We’ve had laws on the books for over a hundred years to stop geedy corpoations from aabusing employees, but if enough stock holders want another 10 cents a share, 15000 ppeople lose their jobs, homes, etc and the stockholders are “giddy like schoolgirls”.
Is that right? Is it even civilized?

Posted by Jim Tuomy | 3:15 pm on January 13, 2009.

The thing that’s missing from Jim’s description is Management. Investors don’t make the operational decisions in companies, There are strong securities laws that require a clear distinction between the management (who makes operating decisions) and investors (who can elect or fire management and board members, but can’t make operational decisions). Failure to maintain that clarity allows Securities watch dogs to “pierce the corporate veil” and go after personal assets of the investors.

Posted by Scott McGregor | 10:41 pm on January 13, 2009.

Investors would ALWAYS like another 10 cents per share. Cutting staff can reduce HR expenses thus boosting the bottom line. But only so much. At some point cutting staff (or cutting the wrong staff) impacts the top line — if you fire your entire sales force, expenses will be reduce but revenue will go to zero. If you cut a new product development jobs today, you might reduce expenses today, but future income might be reduced too. But if you stop a production line and layoff the people who assemble and package products that aren’t selling anyway, you’ll not only save salary costs, you’ll save cost of materials, warehousing and factory maintenance — without any direct negative effect to revenue. Investors don’t like it when companies spend money on people who build products and services that aren’t selling. So they are pleased when they see a company recognize an ongoing problem and reduce those non-producing expenses. But if companies cut the wrong things investors won’t be giddy, they’ll sell the stock pushing its value down. And if the company ADDS jobs that generate extra revenue the investors might also get giddy.

Posted by Scott McGregor | 10:49 pm on January 13, 2009.

If I lose my job, I cut back on my expenses. I buy fewer high priced drinks at Starbucks, I eat out less often at Applebees, I cancel the gardener, and the cleaning service. When I do that, that’s lost tip money for the barista and the waitress. That’s lost pay for the gardener and the maid. Now, I might have some money stored away for retirement that I *could* spend on maintaining my previous expenses, so it doesn’t impact these service providers. But I don’t, because I want to have that nest egg for the future.

When lots of people are losing their jobs and cutting back not only is my local barista losing tips, but Starbucks itself is losing a lot of income. If Starbucks were a person, we would not be surprised that they would reduce their expenses the way you or I would. But somehow people think a company should act differently and continue to maintain its expense levels even though its income dropped. Of course maintaining those expenses while revenues are down still means dipping into its cash reserves.

Posted by Scott McGregor | 11:21 pm on January 13, 2009.

Investors liking layoffs is nothing new. What is newsworthy about that? That has been a common view for a long time. Investors like to see costs cut, and like to see cost-losing initiatives/departments cut. That perspective is as old as capitalism.

This is really a new concept to you?

Posted by Mike | 3:20 am on January 14, 2009.

Here’s my question, does MS really have 15k people to lay off?
MS most definitely has a lot of “balls in the air”, but they’re also delivering products that few, if any, are capable of delivering. Sure they could dump a few people in research. But I gotta say, the research department is going to be paying the bills for the next 5 years, so I don’t think that’s making anyone happy. What am I talking about?
New programming language that will appeal to data-crunchers (definite wave of the future). MS had no real stake in this field, as existing tech was simply inadequate. F# will be used by big business and wall street in crunching massive data sets. This leads to: the cloud computing platform. MS will be making money selling time and resources off their giant server farms. Amazon already has a competing product being used, but Azure has lots of compelling features and integration that Amazon simply doesn’t. MS can really “bring this to the masses”.
The Surface is still expensive and niche. But it’s going to change the way we interact with “computers”. And again, it’s going to be done at MS scale with lots of developer tools to make this easy for everyone.
And these are just some of the most visible products. Heck, Azure is like 10 products wrapped in one big package, stuff like Hyper-V had to come from somewhere.
So it’s easy to say: “trim the fat in research”, but it’s really not that easy. It’s easy to want to “trim the fat in support”, but MS has a lot of contracts built entirely upon providing support alongside their products. And they’re building more products which subsequently need more support, which actually brings in more revenue.
So I will concede, there might be a few bodies they can let go of. But 15,000 bodies is a lot. Unless they’re just chopping entire divisions and the overhead from those divisions, that number would worry me very much.

Posted by Random Guy | 12:02 pm on January 15, 2009.