The big news in this corner of the world are the layoff announcement at Microsoft. Steve Ballmer’s email drops this midway through an email this morning:

As part of the process of adjustments, we will eliminate up to 5,000 positions in R&D, marketing, sales, finance, LCA, HR, and IT over the next 18 months, of which 1,400 will occur today. We’ll also open new positions to support key investment areas during this same period of time. Our net headcount in these functions will decline by 2,000 to 3,000 over the next 18 months. In addition, our workforce in support, consulting, operations, billing, manufacturing, and data center operations will continue to change in direct response to customer needs.

It’s the biggest cutback in company history and my thoughts go out to anyone who is impacted today.

My take:

• This is small potatoes in business history. It’s 5000 jobs over 18 months, a long spread, with an impact that many parts of the company won’t even notice. The normal attrition rate at a tech company has to be around 10% and 5000 jobs from a company of 90,000+ is about 5%.
• The company will open new positions at the same time. The sky is not falling here. Eliminating jobs but creating new ones too (although it doesn’t specify a hiring target). There was an 11% drop in profits from last year, but other than Apple this doesn’t seem far off the mark for the sector, or the business world at large.
• Drawn out firings. More notable is the choice to leave this open ended and draw it out over 18 months. What a morale hit. Bad news is best all at once. It frees people to move on and doing it early gives them an advantage. But now, without guidance to the contrary (e.g. cuts will focus on divisions X,y and Z) everyone is led to believe their jobs will depend on their review performance, making people look out for themselves at work more than is healthy for any team over the next year.
• No Merit increases in FY ’10. We’ve seen the stick, where is the carrot? Recessions should mean smaller carrots, or maybe a less expensive vegetable, but something. I’d drop an entire product, or close down the least strategic group in my company, before I took away performance rewards.

The best summary of news so far and juiciest insider comments can be found at mini-microsoft.