Microsoft Layoff Rumors Persist

Amid news of worsening economic turmoil in markets worldwide, rumors persist that Microsoft may be readying the first formal round of layoffs in the company's history. The latest buzz suggests the Redmond-based software giant may eliminate as many as 15,000 jobs -- though cooler heads say the cuts will come more from attrition and expired contracts than from actual pink slips. Whatever the case, look to January 15 for the big announcement, sources say.

News that Microsoft may be tightening its belt certainly comes as no surprise. It's not the only company to do so -- Yahoo trimmed 10 percent of its workforce in December, for example, while IBM is rumored to be planning layoffs of its own. But it's tempting to speculate whether there may be more behind Microsoft's cost-cutting measures than just a response to the current recession, especially in light of reports that core Microsoft products have lost significant market share in recent months.

Artwork: Chip Taylor
Windows -- the cornerstone of Microsoft's software portfolio -- was hard hit toward the end of the year. In early December, analysts announced that the OS's market share had dipped below 90 percent for the first time. Then its share declined yet another percentage point over the Holiday Season. Most of those Windows machines were replaced with computers running Apple's Mac OS X, but some also went to Microsoft's most hated rival, the open source Linux OS.

Microsoft's Internet Explorer, which has long held the majority of the Web browser market, has also suffered shrinking market share. According to one study, IE's share has decreased by 3.1 percent since October. In its place, users are turning to more modern rivals, including Mozilla Firefox and Google's Chrome, which are widely perceived as being faster, more secure, and more standards-compliant than Microsoft's aging browser.

Plotting the market shares of software packages is a tricky business because the market is perpetually in flux. Microsoft has held such a commanding lead in its core markets for so long, however, that it's hard to dismiss even single-digit declines as being insignificant.

Domination of the operating systems market has long been considered key to Microsoft's dominance in other software categories, such as office productivity software. More recently, however, companies such as Salesforce.com and Google have been emerged as major threats to the traditional desktop software model. They deliver their applications via the Web, making Windows more or less irrelevant -- and if Internet Explorer's market share continues to decline, Microsoft could lose its foothold in this new online platform, also.

Combine these gloomy prospects with the widespread expectation that Microsoft's revenues may fall short of expectations for the first quarter since 2000, and there certainly seem to be hard times ahead for the gang from Redmond. Could the company once called the unstoppable 800-pound gorilla of the software industry be running out of steam at last?

Neil McAllister is a freelance technology writer based in San Francisco.

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