Cracks, not cave-in on tech world's Rainier

It's hard to believe we've gone from Microsoft millionaires to Microsofties in the unemployment line in less than a decade.

But here we are, watching cracks appear in the high-tech version of Mount Rainier. Microsoft has grown into the quiet giant looming over the region, so big that its trickling runoff has spawned an entire tech ecosystem.

Thank goodness it didn't go all Mount St. Helens on us. It's amazing how little Microsoft cut back.

Consider that Intel — the company that makes most of the processors that run Microsoft's software — last week announced a 90 percent drop in earnings.

Even Google slipped last quarter, reporting a 68 percent drop in profit Thursday.

There's no escaping that Microsoft's cutbacks will hurt thousands of families during a terrible economic crisis. Then there are the thousands who work for smaller companies providing services to the software giant.

Microsoft may have to cut further as the downturn continues.

One warning sign was the big drop reported Thursday in unearned revenue — sales from long-term contracts with big business customers.

But the state of Washington should be elated that Steve Ballmer is using a paring knife instead of an ax.

While the Puget Sound region will suffer the most from the layoffs and expense cuts announced Thursday, the overall reductions still won't diminish the benefits of Microsoft's ongoing investment here in people, products and buildings.

Seattle is used to seesaw employment at Boeing, which just announced it's cutting 4,500 jobs this year. The permanent loss of Washington Mutual was a much bigger hit.

Really, 1,400 jobs lost Thursday at Microsoft and perhaps a total 5,000 jobs over the next 18 months is small potatoes compared with what's happening across the tech industry, especially at PC-centric companies coping with the end of a strong five-year run in computer sales.

Intel recently announced it's cutting 6,000 jobs, including 1,000 manufacturing jobs just down the freeway in Hillsboro, Ore.

A little farther south, Corvallis, Ore., is trembling in anticipation Hewlett-Packard will completely shutter a 2,500-employee facility that develops and produces inkjets and other printing technology.

HP has been steadily whacking away at that small city's largest private employer for years, keeping employees and the entire region in a state of uncertainty.

In contrast, Ballmer is doing nips and tucks at a company that clearly needed to rein things in. Don't get me wrong — the construction and hiring are terrific; they bring all sorts of new jobs and smart people to the region.

But current and former employees, and everyone else who has driven by the audacious campus expansion project that's continuing in Redmond, have been shaking their heads, wondering how long Microsoft can keep trying to out-recruit and out-invest Google, IBM, Apple and Sony all at once.

That's just the external appearances. Internally, Microsoft's been struggling with organizational sprawl for years — a perpetual battle of the bulge that distracts managers, frustrates employees and sometimes compromises the quality and timeliness of products. Windows Vista is Exhibit A.

Microsoft is also nodding to Wall Street. The company promised last quarter it would cut costs, and Thursday it followed through.

You would think that trimming nearly $1 billion in expenses would satisfy investors and reaffirm that Microsoft's on sound footing. But investors pushed down the stock, Wall Street analysts called for even deeper cuts, and the region cringed as its golden child stumbled.

The actual cuts are still relatively small from the perspective of Microsoft's scale. We would have seen much bigger layoff numbers — or 5,000 cuts at once — if Ballmer and Co. were kowtowing to investors.

I'll bet they end up cutting fewer than 5,000, by the way, especially after Windows 7 — the company's next PC operating system, due out within the next year — takes off and investors start looking further ahead.

Microsoft's domination of the software industry won't last forever, but it's not over yet.

Thursday's cuts aren't a radical transformation of Microsoft. It's a little inpatient liposuction, so the company will fit into the smaller pants it has to wear for a while.

Brier Dudley's column runs regularly on Mondays in Business. He can be reached at 206-515-5687 or bdudley@seattletimes.com