Vista main culprit in Microsoft layoffs

Enterprise products enjoyed another quarter of double-digit growth

Windows Vista has been trouble for Microsoft perhaps since the operating system's beginning. And this last quarter was certainly no exception. Despite a dip in client software revenue, however, one analyst says the workforce reduction Microsoft detailed on Thursday is healthy -- at least from enterprise IT shops' perspective.

When Microsoft released its earnings report on Thursday, the company indicated not only that it would lay off up to 5,000 workers or 5 percent of its total headcount but also that software client revenue -- as in Windows Vista -- sank by 8 percent.

"Windows Vista didn't do well. Based on our data, a lot of clients are skipping Windows Vista," says Neil MacDonald, an analyst at Gartner. Indeed, nearly every other major analyst firm found a similar lack of Vista adoption, with Forrester Research likening the OS to the failed New Coke.

[ Related: Intel also announced this week that it would  cut as many as 6,000 jobs. | Even before the layoffs, InfoWorld's Randall C. Kennedy posed the question:  Is Windows 7 the beginning of the end of the Wintel duopoly? ]

The Vista troubles continued this week as Microsoft may be delaying Windows Vista SP2, according to one report.

At the same time that IT shops are holding out for Windows 7, there's a global recession and significant uptake in netbooks, all three of which mean that people are simply not replacing their PCs as often as they once did, MacDonald says.

What's more, MacDonald adds, the rest of Microsoft's enterprise-class products actually fared quite well last quarter. "The enterprise products are doing very, very well. It was another quarter of double-digit growth."

Microsoft, in fact, said in its report that yearly license fees drove software tools and server revenue up by 15 percent. MacDonald points to Windows Server 2008, Hyper-V, System Center, and SharePoint as among those successful enterprise products.

"Enterprise IT shops using Microsoft technologies should see that Microsoft is a big company, they've gotten too big and some adjustments are healthy," MacDonald explains, pointing to Microsoft dropping its Windows One LiveCare anti-virus service as an example of the company trying something new, realizing it was not all that good at it and, ultimately, moving on. 

Microsoft said on Thursday that the job cuts will span research and development, marketing, sales, finance, legal, human resources, and IT over the next 18 months, beginning on Thursday when the first 1,400 jobs will be cut.

Copyright © 2009 IDG Communications, Inc.