They wanted 11,000 extra heads when the market was rewarding growth.

Now that the market is rewarding bottom lines - they don't want 11,000 extra heads anymore.

It's easy to "blame the Fed" for the market rewarding the bottom line. But we forget that the reason the market was so crazily rewarding growth 2 years ago was also... because of the Fed.

MSFT stock is barely moved on the announcement. Doesn't necessarily seem like the market is rewarding them.

If the stock isn’t moving, perhaps the news is already priced in.

So either insider trading or a lot of people guessing they’d do a big layoff at some point?

Microsoft stock has been incredibly volatile though in the past year.

> MSFT stock is barely moved on the announcement. Doesn't necessarily seem like the market is rewarding them.

It's always hard to distinguish signal vs noise in stocks, but it has gone up 0.5% in 24 hours, which is a $8bn raise on the market cap.

Cutting $3bn in wages is never going to radically change the market cap of a $1.7T company (you hope!).

Hard to say if the market was expecting layoffs.

They clearly did need/want them at some point. And then things change.

“When the facts change, I change my mind. What do you do?”

no hiring process fires 100%. a healthy company deals with that reality incrementally. since many companies have adopted a policy of just generally not firing anyone for performance reasons, they just accrete these people, and when the opportunity arises (i.e. merger), they vent them en masse. I guess its easier to deal with the emotional/morale issues? probably legal too.

> many companies have adopted a policy of just generally not firing anyone for performance reasons

Not sure if that's true. For example, out of FANNG afaik only G would be least likely to fire ppl, they gave very generous chance to employees to improve and would only do 'piping' as the last option. But all the others have various forms of stack ranking and aggressive piping mechanism.

I would assume many other companies do the same

> Normally, hiring 11,000 people you "didn't need" would be a warning sign that management was incompetent

Not really, Big Tech was in an 'arms' race the last decade where they felt if they did not hire people the competition would and they would be worse off in the long run. They all did this. Hence why everyone is trimming the fat as soon as the bubble showed an inkling of popping.

Everyone over hired, over paid, and didn't innovate with it enough to make up for the spending.

There are tons of people at these companies that can be let go.

Or, it means that they didn't forsee the economy going down to the extent it has. Corporate finances work like any large investment company. How much cash do you have on hand, how much is it earning per year, what is your revenue.

If you suddenly are getting 10% less from investments and possibly less from revenue due to a severe economic downturn, then you need to save 10% in costs somewhere, and for tech companies people are always the biggest cost.

There is no conspiracy here. You may wish that these large companies would have seen a recession coming, but that's not a very realistic wish.

There's no recession, though. There may be one this year, but it didn't exist before all of these layoffs. It may not be a conspiracy, but it seems questionable to believe these companies are not willing a recession into existence through, charitably, pessimism.

I think it is less pessimism and more realism. The fed clearly indicated that it will raise rates until the market cools

As far as the Fed is concerned inflation, unemployment & GDP growth are all definitely higher priorities than the stock market.

I agree. I didn't mean to imply I was taking about stocks.

If the fed is shrinking economic investment until employment and inflation goes down, companies are preparing for slow growth.

The US economy shrank in the first 2 quarters of 2022, and is already forecast to shrink in the first 3 quarters of 2023. Whether it’s in recession or not is a technical issue for economists, but the reality for many companies is that they face a lot of challenges at the moment.

In tech particularly there was a boom as businesses moved online during the pandemic that’s shrivelled away with increasing interest rates and inflation.

There's definitely a recession, however it's hiding behind inflation and rising interest rates. The two trillion in reverse repos are why the recession is having a softer introduction than you may be used to seeing. Companies are both responding too and getting ahead of the equities crunch. The economy crashed and the recession started in full form in March of 2021. But reverse repos have allowed the fed to inject two trillion into equity markets behind the scenes and without the directed action that requires fund managers to rebalance.

For one, in many many companies layoffs start in HR/hiring themselves. If MS needed to hire a ton of people in 2020-2022 it’s not at all a sign of incompetence if they hired a lot of recruiters/other HR folks in that time to handle it, and then spin it down when they aren’t as busy hiring.

The same goes for marketing. If you are going to reduce your marketing spend you don’t need as many FTEs to work on it.

For engineering, MS is a lot more old school than some other tech companies. Internal transfers basically require re-interviewing, and a lot of people don’t have many transferable skills. MS could be better off (and employees even better off) if they directly laid off e.g. engineers working on Windows LTS rather than trying to find them roles in Bing.

Not saying layoffs are ever good, and the details of this one remain to be seen, but I don’t think a 5% layoff signals incompetence

A company that can't figure out what do with employees is just as much a warning sign.

It's a bad signal that Microsoft can't think of any development worth doing.

As customer of their tooling I can think of lots of stuff, but yeah management apparently not.

> Normally, hiring 11,000 people you "didn't need" would be a warning sign that management was incompetent

Sure, but 2020 and 2021 were extremely abnormal.

There's nothing indicating that they hired 11,000 people they didn't need. Many of the people being cut have probably been there for a while but may no longer be needed. The article mentions HR staff being laid off which makes sense since the hiring boom in tech has vanished. I don't think you can draw any conclusions about bad management or mistakes from this, the economy and the tech sector are in a slump with practically every large employer trimming fat. This is just business as usual.

"Management should plan ahead."

*Microsoft lays off 11k in lead up to recession

"No, not like that."

I don't think there's any grand scheme to screw anyone over here. Growth was important and now the balance sheet is more important.

We could always start talking about tech unions and guaranteed severance packages and other employee protections but it seems silly to just brood about 'the management.'

You're thinking at a corporate efficiency level, which is why shareholders want layoffs.

To an individual manager, their pay is generally proportional to the number of reports, so the incentives are for them to hire.