5 no-bull takeaways about Microsoft's restructuring

What's the real meaning of Microsoft's job cuts and reorg? Here are the five points you need to know

It was only a matter of time before Satya Nadella started making major changes to Microsoft, and now they're here: 18,000 layoffs, mostly in Nokia but touching other departments as well. This isn't just the story of a tech dinosaur heaving itself onto the chopping block. Here are five crucial takeaways from the changes.

1. The company is not in trouble -- not by a long shot

First off, doomsters and naysayers can pipe down. Microsoft's stock has been trending upward for two straight years now, and rumors of the impending restructuring actually gave it a 3 percent bounce in after-hours trading. The company has remained solidly profitable despite all the changes in weather, both industry-wide and internal, because it's more diverse than people give it credit for.

Forrester analyst James Staten dismissed the idea that the cuts presage any other kinds of bad news. "This does not signal to me any concerns about their current revenues, profitability, or investment worthiness. If anything it is a step in the right direction on these fronts," he wrote in an email.

2. Cuts alone won't be enough

Few are surprised that Nokia, a company with its own management hierarchies and bloat, would fall most directly under the axe. (Was there any other possibility?) That's only the start of change, not the culmination of it.

RedMonk analyst Stephen O'Grady is skeptical about the prospects of Microsoft cutting its way to transformation. "[18,000 jobs cut] is certainly a big number," he noted, "but as better than two-thirds of the potential total appear to be coming from the acquired Nokia, it's neither a surprise nor likely to be too transformative to Microsoft's core organization."

Quick math bears this out. Microsoft employs around 130,000 people, and Nadella has stated that "up to 18,000 jobs" would be cut. Since 12,500 of those are Nokia positions, that leaves 5,500 throughout the rest of Microsoft. Change has to come in other forms.

3. The days of overextending are done

One casualty of the cuts, Xbox Entertainment Studios, isn't an enterprise unit. It was Microsoft's attempt to build an in-house content studio akin to Netflix. Its shutdown hints at the company's retreat from peripheral areas where it hasn't been able to build a solid presence.

The Xbox itself isn't going anywhere -- it's one of Microsoft's most successful consumer services, and it provides opportunities for developers to make use of Microsoft's cloud services. But say good-bye to the days of Microsoft trying to become a contender in splashy-looking areas that nonetheless remain too far removed from its core competencies. You can spread even a company like Microsoft only so thin.

4. The company's getting de-Ballmerized from the inside out

Nadella is exorcising Ballmer's ghost, so to speak, to allow Microsoft to be a less embattled and hidebound company, a process long under way. Late last year the company jettisoned its widely loathed "stack ranking" system, criticized as poison for company morale. The above-mentioned memo notes that Microsoft will have "fewer layers of management, both top down and sideways." Likewise, Nadella's mission statement cites how "tired traditions will be questioned" and "nothing is off the table in how we think about shifting our culture to deliver on [our] core strategy."

Over the years, Microsoft has shown many other signs of pivoting from Ballmer's views -- evidence the company may be primed to change from within, with little goading from the top. Long before Ballmer left, engineers within Microsoft were itching for more interaction with open source and did not consider it a "cancer," in Ballmer's infamous words.

5. Microsoft's career change can mean your career change

One other aspect not widely bruited about the layoffs: Microsoft plans to both hire and fire.

"I wouldn't be a bit surprised," Staten noted, "if this layoff is followed by a furious round of hiring focused on devs and admin folks who have cloud experience, agile or continuous development skills, or related skills and experience. Any time a company of this size tries to make a fundamental shift, there are a lot of people who no longer fit."

Bob Egan, analyst and founder of the Seraphim Group, sees Microsoft's attempt to change course as also being like a change in career.

"Microsoft for years has been a very successful plumber, a respectable and profitable craft," in the sense that Microsoft's mainstay was in building the software that makes things work. "Now, it seems that Microsoft is deciding to become an electrician. The prospect worries me."

By "electrician," Egan means "creating a future around style of attachment and that experience. That's what electricians do. Where are the outlets? How much power (think: experience) is needed for what you're attaching (think: what needs to get done)?" To Egan, that point of view doesn't involve thinking about the power grid, which is someone else's problem.

Still, the shift means major opportunities, both for Microsoft and all of its future potential hires. Those who previously shunned -- or were shunned by -- the Redmond monolith may want to take another look when the job listings show up.

This story, "5 no-bull takeaways about Microsoft's restructuring," was originally published at InfoWorld.com. Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest developments in business technology news, follow InfoWorld.com on Twitter.

Copyright © 2014 IDG Communications, Inc.

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