A few quick thoughts on the Microsoft layoffs seem appropriate since I spent some time there.  First of all, let me say that I had a great 3 1/2 years there.  I was amazed at the consistently high quality of the people.  I loved working in a truly International company.  I enjoyed making a global impact with relatively routine decisions.  It was great.

But Microsoft is a company that is finally coming to terms with the economics of the Internet… a truly disruptive technology that is just now beginning to kick into high gear 13-14 years after its emergence.  It's a company that faces the classic innovator's dilemma… it has healthy cash flows from the Client, yet it needs to modernize to monetize the Web.  Most institutional success comes from winning the Client with closed standards (Windows & Office).  Many decisions are made on the basis that the Web & current competition (Google, IBM/Open Source, Adobe, etc.) are no different than past competitors… so similar strategies will work again.  Maybe, maybe not.  Nobody knows for sure.  But it is a company conflicted by its need to maximize cash flows and take advantage of new opportunities.  And it is a company that quite frankly takes a long time to execute at times on the Internet, although often for understandable reasons.  All of this may be too much for the company to handle.

If you look at a snapshot of recent earnings reports, you'll notice that IBM, Google, and Apple all exceeded expectations while Microsoft did not.  Maybe it's too early to analyze, or maybe the other companies are in a better position to compete as money gets tight.  Maybe as Mish suggests, it isn't too early to analyze — Microsoft's business model needs to be reinvented.  I don't know.  What I do know is that the company is indeed conflicted if my time there was any indication, and the stunning cash flows of Windows and Office may not be able to hide this reality much longer.  Every customer is becoming a price sensitive customer… and that doesn't bode well for Microsoft in my opinion.

I hope my friends and colleagues back at Microsoft, especially those affected by the layoff, are OK through the transition.  I assume it will be a tougher environment in Redmond for the time being as the company faces real business pressures arguably for the first time in its history.  For those who are laid off, I trust that most will do well.  Some will find jobs, some will reinvent themselves.  Others will get tired of searching and searching and not finding a job, and they will turn to their great ideas and entrepreneurship in an act of last resort.  “I can’t find a job, so I’m going to create something.”  And on a wing and a prayer, a new company is launched.  Many of those will find strength and power in themselves that they never even knew they had.

This may seem counterintuitive and perhaps insensitive, but layoffs are part of the natural business cycle that is NECESSARY for economies to grow.  When there are not enough jobs, people often need to create their way into an income.  It's easy to forget when the economy is chugging along and everyone has a job.  I think people can fall into a false sense of security and entitlement that simply isn't real.  The next boom in entrepreneurship will come in a year or two when the legions of the laid off get their ideas in motion, joining the rest of us serial entrepreneurs who have a major personality defect. ;-)  Ideas will flow and we all will benefit.  But until then, times will be tough.  Best wishes to you & your family as we all go through this rough patch.