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Friday, 29 July 2016 11:15

Microsoft to reduce global workforce


Microsoft will cut an additional 2850 jobs on top of the 1850 announced in May. The newest round of cuts brings the total job losses at the software giant to more than 12,000, largely as a result of the company’s Nokia fiasco.

In its annual report filing to the US Securities and Exchange Commission (the 103-page report makes interesting reading if you have the time as it outlines its entire business) revealed it had eliminated 7400 positions in the 2015-16 financial year, primarily from its phone business and that a further 4700 would go before the end of FY 2016-17. Most of those affected have already been advised.

The report says that of its 114,000 employees, 38000 were in operations, including manufacturing, distribution, product support, and consulting services; 37000 in product research and development (14% of revenue is spent here); 29000 in sales and marketing (17% of revenue); and 10000 in general and administration (5% of revenue).

Under the heading “Risk Factors” it warned: “We face intense competition across all markets for our products and services, which may lead to lower revenue or operating margins.”

“Our competitors range in size from diversified global companies with significant research and development resources to small, specialised firms whose narrower product lines may let them be more effective in deploying technical, marketing, and financial resources. Barriers to entry in many of our businesses are low and many of the areas in which we compete evolve rapidly with changing and disruptive technologies, shifting user needs, and frequent introductions of new products and services. Our ability to remain competitive depends on our success in making innovative products, devices, and services that appeal to businesses and consumers.”

The risk factors include:

  • Competition in the technology sector
  • Competition among platforms, ecosystems, and devices.
  • Business model competition.
  • Significant investments in new products and services that may not achieve expected returns.
  • Acquisitions, joint ventures, and strategic alliances may have an adverse effect.
  • Increasing focus on services presents execution and competitive risks.
  • Not realising the revenues expected from intellectual property rights.
  • Third parties may claim infringement on intellectual property rights.
  • Inability to protect source code from copying if there is an unauthorised disclosure of source code.
  • Cyber-attacks and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, or harm to our competitive position.
  • Disclosure of personal data could cause liability and harm our reputation.
  • Outages, data losses, and disruptions of online services if an adequate operations infrastructure is not maintained.
  • Government litigation and regulatory activity relating to competition rules may limit design and marketing of products.
  • Global operations have potential liability under anti-corruption, trade protection, and other laws and regulations.
  • Laws and regulations relating to the handling of personal data may impede the adoption of our services or result in increased costs, legal claims, or fines.
  • Business depends on ability to attract and retain talented employees.
  • There are claims and lawsuits that may result in adverse outcomes.
  • Additional tax liabilities.
  • Hardware and software products may experience quality or supply problems.
  • Global business exposes the company to operational and economic risks.
  • Catastrophic events or geopolitical conditions may disrupt business.
  • Adverse economic or market conditions may harm the business

I wonder how Satya Nadella sleeps at night.

However, the company had a reasonable year with US$85,320M in revenue, and a net income of $16,798M – about a 20% net profit margin that is not too shoddy. It has total assets of US$193,694M.

It is a complex mix of personal and enterprise computing, cloud, software and devices. Here are a few highlights:

  • Phone revenue decreased US$4.2 billion or 56%, as 13.8 million Microsoft Lumia phones and 75.5 million other phones were sold in the fiscal year 2016, compared with 36.8 million and 126.8 million sold, respectively, in the fiscal year 2015.
  • Surface revenue increased US$486 million or 13%, primarily driven by the release of Surface Pro 4 and Surface Book in the second quarter of fiscal year 2016, as well as the release of Surface 3 in the fourth quarter of fiscal year 2015, offset in part by a decline in revenue from Surface Pro 3.
  • Windows revenue decreased US$871 million or 5%, mainly due to lower revenue from patent licensing, Windows OEM licensing, and Windows Phone licensing. This also includes the decision to provide a free upgrade to W10.
  • Search advertising revenue increased US$1.7 billion or 46%. Search advertising revenue, excluding traffic acquisition costs, increased 17%, primarily driven by growth in Bing, due to higher revenue per search and search volume.
  • Gaming revenue increased US$132 million or 1%, primarily due to higher revenue from Xbox Live and video games, offset in part by lower Xbox hardware revenue. Xbox Live revenue increased 17%, driven by higher revenue per transaction and volume of transactions. Video games revenue grew 34%, driven by the launch of Halo 5 and sales of Minecraft. Microsoft acquired Mojang, the Swedish video game developer of the Minecraft gaming franchise, in November 2014. Xbox hardware revenue decreased 16%, mainly due to lower prices of Xbox One consoles sold and a decline in Xbox 360 console volume, offset in part by higher Xbox One console volume.

I could go on, but if you are keen read the report for more. What is clear is that enterprise cloud had the major growth, Office 365, Dynamics, Intelligent Cloud and more were all up.

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Ray Shaw

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Ray Shaw  has a passion for IT ever since building his first computer in 1980. He is a qualified journalist, hosted a consumer IT based radio program on ABC radio for 10 years, has developed world leading software for the events industry and is smart enough to no longer own a retail computer store!

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