Throughout every sort of economic turmoil in recent memory – the deep recession in the early 80s, business downturns in the early and mid-1990s, and even the dot-com crash in 2000, there’s been one constant that you could take to the bank every time: Microsoft would continue to grow. No matter what, the company steadily became larger and more powerful. Until now. In April, Microsoft announced that, for the first time, quarterly revenues were significantly lower than the preceding quarter.  In January, the company also announced the elimination of 5,000 positions, 1,400 of which took place immediately; an additional 3,000 layoffs were announced today.

How bad is this? Do we put on our face masks, crawl into the bunker, and start living off of our canned food stockpile? Naw. We don’t see these layoffs impacting what MS can do in the market or creating a negative effect on the company as a whole. On the contrary, this might actually be a good thing for MS. Over time, even the most successful and efficient company builds up a layer of fat – projects that they really shouldn’t pursue, areas that have more staffing than necessary, etc. Of course a layoff is painful to both employees and management. But if it’s done correctly, it can be kind of like corporate angioplasty: it clears out vital company arteries. Intel, HP, and IBM have done this over the years with great success, and we expect that Microsoft will too. It’s kind of like how Clemenza explained Mafia wars to Michael Corleone: “This stuff has to happen every seven years or so..it clears out the bad blood…” Not a great comfort to the guys who get whacked or to the people who are taking the hit in the Microsoft layoffs, but it’s what needs to happen every once in a while. With the revenue shock and the layoffs, Microsoft becomes mortal – just like every other company in Techland.