New Microsoft CEO Satya Nadella has already made his mark on the Redmond, Wash.-based technology company, beginning with an open letter to employees, investors, analysts and anyone else within the reach of a computer.
In his letter, Nadella made many cryptic, read-between-the-lines statements alluding to a change of direction for Microsoft transforming it from a desktop-based PC products and services provider to a mobile computing and cloud services company.
The first tangible effect of Nadella's transitionary vision was revealed last week with the announcement of 18,000 layoffs company-wide to take place over the next six months. This number represents about 14 percent of the company's workforce of over 127,000.
Approximately 12,500 of these jobs will be shed from "synergies and strategic alignment" with Microsoft's recently acquired Nokia Devices and Services business in Finland. The acquisition added 25,000 employees to the payroll, so no surprise that Nokia employees would represent redundancies that would be addressed. The 12,500 jobs lost will consist of professional and factory positions. The remaining 5,500 positions will be axed from marketing, sales and engineering.
This leaves industry observers waiting to find out what's next. Right now, what's next is Microsoft's fourth-quarter earnings statement, to be released July 22.
It is believed that Microsoft will report earnings per share (EPS) of 60 cents on revenue of $23.03 billion. The previous quarter saw an EPS of 68 cents, but on lower revenue of $20.4 billion.
This leaves analysts mostly bullish on Microsoft's outlook, the usual reaction when a giant corporation sends thousands of rank-and-file employees packing. Although Nadella's corporate about-face is not yet fully baked, the company's financial footing remains sound, with trackable but slow-paced growth to this point.
Digital financial media company TheStreet rates Microsoft as a "buy" with a ratings score of A-. It commented "We rate Microsoft Corp. (MSFT) a buy. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels, solid stock price performance and good cash flow from operations. We feel these strengths outweigh the fact that the company has had subpar growth in net income."
While the financial world is mostly happy, politicians on both sides of the Atlantic are disgruntled. Sen. Jeff Sessions, R-Ala., bemoaned the loss of American jobs the day Microsoft announced the layoffs and tied it into tech companies' request for immigration reform and push to get additional H-1B visas to accommodate foreign-born workers in technical jobs. In Microsoft's case, there are many more foreign-based employees that will be leaving the company's employ, making Sessions' comments a bit off target. Finnish leaders expressed hope Microsoft would honor its pledge to build data centers there to help offset the Nokia job losses.
Of course European Commission members and Finnish government officials have much more understandable beef, as expressed by European Union Commissioner László Andor. "I deeply regret the significant job losses announced by Microsoft today because of the impact these will have on so many individuals, their families and the local communities they live and work in."
