Yesterday, Microsoft laid off an additional 3,000 employees in its second round of job cuts so far this year. Combined with the 1,400 jobs cut back in January, Microsoft has almost reached its goal of trimming 5,000 jobs by June of 2010.
One of the largest department cuts within Microsoft was at the Massive in-game advertising division. According to VentureBeat, around 75% of employees working in the Massive division were let go. Microsoft acquired Massive back in 2006 for somewhere between $200 and $400 million. These recent cuts to the department are an indication that in-game advertising is not panning out to be as lucrative as originally planned.
In an email to all Microsoft employees, CEO Steve Ballmer states, “With this announcement, we are mostly but not all done with the planned 5,000 job eliminations by June 2010. We are moving quickly to reach this target in response to consistent feedback from our people and business groups that it’s important to make decisions and reduce uncertainty for employees as quickly as possible, and so that organizations can concentrate their efforts and resources on strategic objectives.”
It seems to me that these layoff are more of a gesture to please investors and Wall Street, rather than direct moves to trim costs. Severance packages for these 3,000 employees, combined with Microsoft’s plan to hire 2,000 to 3,000 new employees by the middle of 2010, will eat up any long-term cost savings. Many of the people let go today will probably end up getting re-hired in the next year.
Shares of Microsoft are down about 2% since the markets closed on Monday, prior to this announcement.
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