Trimming the fat?

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Microsoft share priceThe Microsoft layoffs (they’re reducing headcount by approx 5.21%) announced last week have been well and truly covered, with many (like Mini) saying it’s too little, too late, and others lamenting that a company of Microsoft’s stature has ‘steeped’ to get rid of it’s biggest asset.

My opinion? Well, it’s just business right? I’m sure the decision wasn’t made lightly, and who am I to conjecture as to what the proper decisions should have been? Check back when I’m heading up a billion dollar company and I might just have something worth hearing in that regard…

Is it the right decision? Time will tell.

Trimming fat

So, moving on. The item that interests me in all this, is when people talk about ‘trimming the fat’. I mean… what does that even mean?

My understanding is they mean something along the lines of ‘getting rid of the stuff (usually people) that aren’t really seen as benefiting the business’.

Now, I’m guessing that Microsoft doesn’t just hire people for the sake of it. (Of course, we’ve all seen companies with layers of useless management and wasted resource, and no doubt there is a bit of that in the halls at MS as well. But the main, I’m going to assume that most of their hires are beneficial and add value.)

So, theoretically, Microsoft’s hiring over the last 12 months (they increased headcount by approx 14%) has been pursuant to a business strategy. One that they intend to make money from.

The question thus becomes: At what point does the short-term cost outweigh the future return?

And the part answer: When the future timeline gets extended.

Timelines

So, this isn’t about ‘trimming fat’, this is about timelines. Microsoft is simply indicating that they believe the current economic conditions are here for a while. No real surprises there.

For Microsoft, the economic downturn is going to be here longer than they originally thought, and longer than the time it takes to get a solid return from their recent hiring strategy. But interestingly, not for all their strategies. A 14% increase over the last 12 months and a 5% decrease over the next 12, indicate that Microsoft still has confidence in some of their strategies from last year.

My question: How confident am I in Microsoft’s confidence? Is now the time to start buying MS stock?

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About Craig

I'm the co-host of HubShots and the CEO of XEN - helping mid-large B2B companies with their digital marketing and lead generation.

Craig Bailey

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