Comment by pseudosavant
17 hours ago
Microsoft made $134B in net income in the last 4 quarters. It used to be if you worked for a company that was printing boat loads of money that you had job security.
Now, even if the company is crushing it, they'll still see employees more as a cost center instead of a revenue generator.
No, this has never been the case. Companies are and always have been very conscious of wage and salary expenses, as it's one of the most controllable categories on the P&L.
They are making $600k in net income per employee. 10+ years ago, I'd never seen a mass layoff at any company making that kind of money per employee.
Their net income is up more than 2x in just the last 5 years. 10 years ago, Microsoft only had $85B in revenue, now they are up to $134B in net income, and they need to let 25% of the company leave?
I'll also note that the 25% didn't include anyone VP or higher. So, the most expensive employees aren't being shown the exit, just the people doing the actual work.
If I have a team of 20, making a lot of money, but I think I can do the exact same job with 15 because of AI productivity gains, should I keep the other 5 employed for the vibes?
The total net income doesn't matter: The move is management saying they are overstaffed for the work they think they need.
Assume Microsoft is expecting just a third of people to take the offer. It's just too many people to want to move to a different division that needs more labor: It's basically entire divisions that they'd have to create from whole cloth.
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> now they are up to $134B in net income, and they need to let 25% of the company leave?
Tomorrow they’ll announce that they’re going to spend $134b on new data centers.
Contrast that with NVIDIA's princely $2.5M net income per employee.
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profitable divisions are making more than that per employee
while other divisions are sinking ship
there always a case for a yard cleanup and decluttering
But like if your company is making money hand over foot you didn't typically cut staff by 25%. You could just as easily do a hiring freeze and get out ahead of it. I mean if your profit metric is showing all green and growing you have to be really cold to say we need to fire 1/4 people now why? (to maximize shareholders short term value of course)
> I mean if your profit metric is showing all green and growing you have to be really cold to say we need to fire 1/4 people now why? (to maximize shareholders short term value of course)
Yes, it's cold, but in the grand scheme of things, it's good for the society if companies are efficient and the economy is efficient. An efficient economy means that we can produce and consume more per hour worked.
Such behavior by companies may not be in my self-interest but that's another matter.
They aren't cutting staff because they made a ton of money. They are cutting staff because they see trouble on the horizon and are positioning themselves for that. Layoffs are rarely lagging indicators. They are more often predictors of trouble coming. This bubble will explode, MSFT wants to survive it. Thats all there is to it.
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And one of, if not the most, expensive costs
AI adoption is a huge shift from labor to capital. Its history repeating, now instead of muscle power being replaced its brain power.
The amount of capex flying around requires raising funds, there have been dozens of stories recently about investors demanding higher rates for AI bonds. MSFT et al need to get their balance sheets in order to get good rates. Also, everyone is waiting for the bubble to burst, getting the house in order ahead of it is very prudent.
this is definitely about over investment in AI, regardless of whether it was smart or not. They need to recover those monies.