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Microsoft Tallies True Costs of M&A Boom: Layoffs, Write-Offs, Shut-Downs, Economic Decline
Wolf Richter www.wolfstreet.com www.amazon.com/author/wolfrichter
As the M&A boom in the US explodes from record to record, with one mega-merger succeeding another, Microsoft clarified on Wednesday just how much all this fun costs down the road, in jobs and dollars: relating mostly to its acquisition of Nokia, it announced a second wave of layoffs, write-offs, and shut-downs.
Share repurchases, M&A, layoffs, and cost-cutting are easier to make happen for a CEO than inventing things and boosting sales organically, which is really hard.
Companies call the dizzying costs of acquisitions, paid for with cash and/or stock, “non-cash charges” to make them appear irrelevant. Analysts feed out of their hands and eat it up. To justify acquisitions, CEOs and analysts sprinkle their pronouncements with terms like “efficiencies” and “synergies” that are euphemisms for cost-cutting, destruction of productive capacity, and layoffs.
In September 2013, Microsoft acquired Nokia’s mobile-phone business and patents. Nokia was junk-rated. Its market share was collapsing. It had lost over $4 billion in the prior year. But its marginalized smartphones were using the Windows Phones operating system that no one else of consequence was using. And that was a big deal.
Microsoft paid $7.2 billion. To make the deal sound palatable, it promised $600 million in annual cost savings – the efficiencies and synergies – within 18 months. That was CEO Steve Ballmer’s doing.
In February 2014, Satya Nadella was anointed CEO. On July 17, the meaning of annual cost savings became clear: the company would axe 18,000 people and take a $1.6 billion “non-cash” charge. And in premarket trading after the announcement of the job cuts, shares rose to a 14-year high. Nadella was putting his stamp on the company.
Almost exactly a year later, this Wednesday, he sent an email to employees to “update” them “on decisions impacting our phone business….”
Microsoft would axe another 7,800 people globally, nearly 7% of its already trimmed-down workforce, “primarily in our phone business,” as Nadella wrote. He expected it to happen “over the next several months.”
And a huge pile of money has gone up in smoke:
Today, we announced a fundamental restructuring of our phone business. As a result, the company will take an impairment charge of approximately $7.6 billion related to assets associated with the acquisition of the Nokia Devices and Services business in addition to a restructuring charge of approximately $750 million to $850 million.
In an email to employees in late June, quoted by the New York Times, Nadella tried to get his employees all excited about the future by warning them that Microsoft would have to “make some tough choices in areas where things are not working and solve hard problems in ways that drive customer value.” People could imagine what was coming. And it wasn’t reassuring.
Now things would change, according to his email on Wednesday, in impeccable corporate speak:
We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem that includes our first-party device family.
In the near term, we will run a more effective phone portfolio, with better products and speed to market given the recently formed Windows and Devices Group. We plan to narrow our focus to three customer segments where we can make unique contributions and where we can differentiate through the combination of our hardware and software. We’ll bring business customers the best management, security, and productivity experiences they need; value phone buyers the communications services they want; and Windows fans the flagship devices they’ll love.
Beyond the corporate speak? The “standalone” business Microsoft bought for $7.2 billion a year and a half ago would essentially be shut down. The costs are ballooning. The tab for the Nokia acquisition and some other moves, with both waves combined, now lists 25,800 jobs axed and $10 billion down the drain.
That’s how M&As work. They’re the ultimate form of financial engineering. Rarely does anything good come of them that moves the economy or even the company forward. Instead, they entail layoffs, write-offs, shut-downs, and economic decline. In some cases, they generate oligopolies that then can exert pricing power and stifle innovation, which further degrade the economy.
But there are some benefits. The executives of the acquired companies get a fancy package. The executives of the acquirer fatten up their corporations, and thus their own fancy package. Acquisitions are great deals for insiders and the stockholders of the acquired companies. And Wall Street loves the fees it can extract from them. But somebody has got to pay for it.
As in Microsoft’s case, there is a long lag between the acquisition announcement and when the “efficiencies and synergies” start wreaking havoc on the broader economy.
Despite the acquisition, Windows Phones has a miserable 3% or so of the smartphone market, not even an also-ran next to Apple’s iOS and Google’s Android. Former Nokia CEO Stephen Elop, who transferred to Microsoft with Nokia, is already gone, after having been richly rewarded via, among other methods, the acquisition. And Ballmer retired shortly after the acquisition and bought the Los Angeles Clippers for $2 billion.
The current M&A Boom, the biggest ever, is far bigger than the last two, and they both ended in crashes. Read… “Everyone Is Wondering When the Volcano Will Erupt”
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http://albainternazionale.blogspot.it/2015/07/wikipedia-made-in-langley....
CIA, Langley, Wikipedia FAKE ?
I've worked for microprocessor design houses for most of my career. Think of Ebola, think of the Black Plague... now think Microsoft. If you aren't running a version of Linux my question to you is why not? Are you afraid to learn something new and not quite in your comfort zone? Get over your fear, and help the world be rid of Microsoft.
Standard Disclaimer: SUN Microsystems employee 14 years... Unix is a second language to me now and in the beginning there was the command line. And it still works better than any crap Microsoft will ever produce.
As an obnoxious ass who still believes using the command line is "real" computing, I completely agree. If only I could reverse engineer the device driver for my USB modem, I would ditch Windows completely.
One last observation... Never, ever hire an Indian for any position higher than a low level management position and even then watch them like hawks. Because if you don't, there isn't enough bug killer to stamp out what will soon be an infestation of Indians in his department. I've seen this happen at every company I've worked for where an Indian gets into an upper management position. Just look to Microsoft as the ultimate example of this, and see how many openings will be posted at the Microsoft offices in India over the next few months.
That mirrors my experience closely. But you left out one thing, when they get into management positions you will never find a bigger hands down utter jerk on the planet. Do not put Indians in charge of managing staff, or a business, they're for some reason far too mentally immature and what will result is a person you thought seemed OK, affable, friendly, mature, will instantly transform the moment your back is turned into the most idiotic cunt you've ever encountered. I kid you not, Indian men in particular seem to have this internal Jeckel/Hyde 'I'm-a-total-cunt' switch in-built, and as soon as they gain authority over others, it switches on. I have seen it again, and again, and again.
That said I've seen it only in Indian-borne Indians and Fiji-borne Indians. Second gen western-borne Indians tend to be like everyone else. So it's what their Indian culture or birth teaches them that's doing it. If they still talk like an Indian, with that accent, they are the ones to never trust in any position of power. Indeed it seems the family needs to be in the west for about 50 years before the 2nd generation wake up to themselves and stop being total pricks.
When you see that you understand why India is going to keep struggling.
Perhaps this is due to the caste system? I personally do not work with Indians in my field but having listened to numerous issues Mr has had with many in his job, I'm thankful he hasn't strangled a few and ended up in jail. The issue is not competence but cultural.
Funny how diversity is trotted out as a panacea for appreciating and celebrating differences when the clash of so many cultures in the corporate world actually is more of a problem when you are developing a product. My husband will crawl over broken glass to get an experienced, qualified white male which in his field is now a rarity.
Miffed
The same could apply to foreign-born MENA, Eastern Europeans and Chinese. Because they didn't grow up with the politeness and cultural norms of the new world, honesty and integrity are not in their vocabulary.
I think that's exactly what's doing it Miffed. All of the Indians I've encountered doing this were quite well-educated, usually in an Australian Uni, and living in Australia for years, spoke with the accent. The well-educated traveling Indians living in Australian and emigrating here are generally all upper caste.
What amazes me is they seem perfectly normal, absolutely fine until they get that first taste of power and control, or rather, status over others.
And then they're the most arrogant high-handed jerks you'll ever meet. First time I saw it was with a fairly close friend from Uni named Naresh, and you could not find a nicer guy for all the time I had known him. Everyone and I mean everyone liked him. So a few years out from Uni I met up with another friend who's just been working under him. And I asked him what he thought of Narash, wasn't he a great guy?
And this friend told me he was the most arrogant obnoxious petty little wanker that he'd ever encountered. I simply couldn't believe that we could be talking about the same Naresh, so I went to visit him and I saw directly the way he was treating people working under him. He was fine with me, as I was 'above' him, but anyone he saw as under him was dog shit under his heal.
He was sacked soon after. You just can't have people like that around, very bad for business and morale.
And after a few more encounters with this behavior I now know Naresh was a typical Indian immigrant.
It's a great shame for them. And I estimate it is the root cause of the sudden rash of cases of Indians getting beaten-up at random in Australia, a few years back (which is less prevalent now). They sincerely think there's nothing wrong with that incredible behavior, and they expect to be able to get away with it in western countries. I was also surprised to find out that they treat Australian aboriginals and Islanders like dogs, and that aboriginals beat the shit out of Indians if they catch them.
Any cultural Indians reading this: Seriously, don't even consider doing that in western countries, leave it in India, in fact, get rid of it in India and India may finally bloom.
I am sorely tempted to copy this entire conversation chain over to Linkedin just to watch the smiley-faced talking heads explode in a paroxysm of political correctness.
"Funny how diversity is trotted out as a panacea for appreciating and celebrating differences"
Funny how "appreciating and celebrating differences" is touted as amounting to dick in the real world, rather than whether or not anything is actually achieved.
Funny no matter how hard they try, they can't make any of this seem like anything better "Than look at what he/she did, and they're not even A WHITE MALE!" or see how demeaning that is.
We import 265,000 Indians with fake degrees every single year even though there are no new tech jobs. The europanic ameircans are thrown in the gutters and replaced by smelly third worlders.
The americans end up unemployed, starving, and foreclosed.
Isn't that Genocide? Why is our government happy to commit genocide against our best and brightest and how long before they wise up and look for a country that isnt hell bent on their destruction?
Tim Cook exports at least one million jobs to China that could be done by the people who are mostly buying his exported to India Microsoft competitor. He recently came out as gay, why not when there's so many to BF...
Truer words have never been spoken on Zerohedge, other than "Audit the Fed" and "market manipulation".
It is nice to see the CIA-sponsored company like Microsoft, to die.
Reason, why I run since 30 years Unix/Linux only?
Quote: "We’ll bring business customers the best management, security, and productivity experiences they need; value phone buyers the communications services they want; and Windows fans the flagship devices they’ll love." - I would be updating that resume.
--------------------
Choice A) Give a thumbs down to all those using Windows and wish they had a real alternative.
Choice B) Thumbs up if you love your Windows and can't wait to get that Windows 10
You don't know the half of it. Microsoft calls it the Customer Experience Improvement Program. It's on all the time reporting back to Microsoft. It's a PITA to get rid of, but it can be done.
Follow the instructions from this blog. The information pertains to Windows 7, but should be pretty similar in Windows 8 but probably is much different in Windows 10.
http://securityforwindows.blogspot.com/2015/03/i-recently-upgraded-my-tr...
Once you are finished with that one, take a look at this one describing Shellbags. http://www.williballenthin.com/forensics/shellbags/
Silly name, but here's what Shellbags are: Microsoft Windows uses a set of Registry keys known as “shellbags” to maintain the size, view, icon, and position of a folder when using Explorer. These keys are useful to a forensic investigator. Shellbags persist information for directories even after the directory is removed, which means that they can be used to enumerate past mounted volumes, deleted files, and user actions.
Windows 7 has about 250 event logs. Windows 10 has over 1,000. All to improve your Windows experience, I'd imagine. /sarc
Thank you and so you take your machine and obliterate it when finished? Sounds like a fun solution.
omit
Hard times for M$. Supercomputers are dominated by Linux (97%), as are phones, modems, ect..
Microsoft is even losing its server market as famously demonstrated in 2009. They used the London Stock Exchange as an example to advertise M$ server systems, then the LSE suffered an eight hour outage from its windows / TradeElect software. LSE switched to SUSE Linux.
The only place M$ still dominates is home desktops. What can you say about an OS that can't even handle metadata (natively anyway). I'm guessing they spend more on copy protection and advertising than software development.
The big problem with Windows Phone compared to Apple iOS and Google Android seems to be a smaller number of apps. I have not seen any estimate on how much it would cost to fix that problem. That would be interesting information.
No .. the biggest problem is that it runs a version of Windows... and that means it is insecure by design.
If you think I am being harsh, I am not ....
Technically:
The event loop which is at the heart of all windows programs has no security on it ... so you can stuff any event you like into any program running... so you just poke naughty commands into any task that runs as administrator ....
So anyone can write code can effectively run as adminstrator and bypass any security - and that is baked into the heart of Windows internal design. It can never be secure.
Ballmer got his. That's all that matters.
Your avitar kinda looks like Ballmer...
What's the cost of selling the McDonalds of Operating Systems?
After the M&A Boom, comes the big stock market crash. That's right there in the article. I lived through it; I know it. Afer the M&A Boom comes the Stock Market Crash; just keep repeating that to yourself until you begin to get it. GET OUT OF THE STOCK MARKET. NOW !!
$2B for the Clippers, ha, a continuation of sound and saavy business decisions.
The NOKIA of basketball teams?
In all fairness that's like criticizing someone for spending half a million dollars on a Lamborghini. Sports franchises are now lifestyle accessories (and sometimes money laundering tools) for the uber-rich.
I bought an HP Pavillion with Windows 8.1. What a goatscrew. It was "updated" without my permission. Other updates caused problems. I tried to stop updates from control panal and it said I had no Administrative rights even though I was the only administrator.Google provides a complicated process to get back my administrative rights.
Windows wants to go to a subscription service that you pay monthly. I feel sory for Microsoft employees but company is getting what it deserves. Go for free Linix. I have installed Windows XP on my other machines and can control "updates". Windows asks to update XP even though they don't support XP anymore.
The administrator account has been "hidden" since Vista (yeah, I used that big steaming load). All for our own protection, of course.
You can update XP. MS still serves up patches for the POS version. A simple registry hack will identify your setup as a POS terminal. Do a goggle search for xp pos updates. having said that and havng used 8 and 10, Win 7 is the last and only Windows I will be running.
wally-12 : bought an HP Pavillion with Windows 8.1. What a goatscrew. It was "updated" without my permission.
You ain't seen nuthin' yet. Wait 'till you see Windoze 10.
Why did you do it ? order the DVD disc to install Linux Mint 17.1 in your HP Pavillion; it's $4.95, to cover the postage, and install it. Wipe the drive clean and install Linux Mint; why do you want problems when a problem free world exists ? I had a MS OS; once; but I like to think I'm not stupid, so I installed Linux Mint, this was back in Mint 10 days; and deleted everything else on the hard drive. Research it; find out how it works, there are tutorials all over U-tube. It works perfectly. it has an office suite; it has a PDF reader, it manages printers, it does SKYPE and Bluetooth; if you hve enough sense to choose Firefox as your browser you can block all the ads on the internet. OH, and by the way your machine will suddenly become faster; and it will never slow down.
it doesnt have support for all the network cards. it doesnt have support for all printers either. other than that, mint is great.
Why is Windows 10 being so aggressively promoted via a non-removable icon on my W7 machine? Evidently, W 10 must have a vastly increased amount of spyware and they are lusting for blood like a vampire.
Windows 8.1 is an abomination.
Why do you have a W7 machine ? go to U-tube and look at some tutorials on Linux Mint; Linux world is confusing, there are too many possibilities; so that's why I'm here. There's only one possibility; LInux Mint 17.1; you pay the postage for the DVD; put it in the DVD reader and follow the directions; when prompted, tell the system to erase the hard drive and re-format it and install Mint. Problem done. It's too easy, right ? this couldn't be true ? Well, it really is this easy, and it really is true.
I actually bought a Win 7 Ultimate licence recently - wanted to run some software that only has a Windows version,.....
BUT - I installed it in a Virtual Machine under Linux Mint 17.1
It only gets to run that single application, and I disallow all software updates on it. It is safely quarantined from my real information by the virtual machine ... and it is still a pain to use.
I have Ubuntu running on a separate laptop. Great software. I would like to eliminate W7 on the PC but haven't managed the transition yet. Not all software that runs on W7 and is used by my clients is available for Linux, although many important applications are.
Hey, to get rid of that, you need to uninstall a specific Windows update (then hide it, so you don't reinstall it). Google it and you should find it.
The update that you need to uninstall is KB3035383. Then once uninstalled, Windows will again offer to install it as an optional update. Then you need to *hide* it. Then you will be rid of it.
If you have Windows set up automatically update then you will never get rid of it. You have to set Windows to "download but ask to install updates".
More information here:
http://www.howtogeek.com/218856/how-do-you-disable-the-get-windows-10-ic...
Even if you hide it, and have Windows Update set to manually update, you will still get it as an "optional update" sometime in the future. Just happened to me this morning.
No; wrong answer. you uninstall Windows; completely; and iinstall Linux Mint; it does everything you want to do.
Seen a few small, prosperous, businesses destroyed through M&A . Corp. version of Cuckoo brood parasites.
Yup. I watched one that produced resonant inspection technology that was incredibly useful for manufacturing, and where it was applicable, it produced far superior results to the industry standards for kicking out defective parts while letting good parts through. The M&A wasn't the only cause of the company's demise, but I think they probably would have made without the M&A.
Here is why Microsoft is doomed. Full stop...end of story.
They are sandwiched between 2 things.
Apple....who makes better software and hardware than Microsoft at a higher profit margin. They also OWN the eco-system market. That is to say.....once they make a product a very diverse and profitable third party eco-system springs up around it because Apple products are very focused and standardized across model lines. Much less fragmented than the Android world and the Lumia....<snicker> world. In fact, odds are Microsoft is completely out of the phone business by 2H 2016.
Free, Open Source, Linux......because....well....FREE. When you can get a free operating system, free Office equivalent, free software that replicates most of Microsoft's offerings.....well....how can you compete against free. But even with paid services from Red Hat, Suse and Ubuntu for corporations.....the licensing and the fact the software is open sourced and can be tinkered with all means that the Linux and Open Source world is FAR LESS onerous than paying the Microsoft tax anymore.
That's it. That's all. Microsoft is done. By this time 10 years from now....Microsoft will have split itself in two.....and probably will be giving away Windows and Office for free and will have open sourced most of the code just to try to stay relevant. They will first try the rental model ( licensing by cloud ) but that will fail miserably as most of their initiatives.
Microsoft lost the internet.
Microsoft has lost the cloud
Microsoft has lost the mobile music space
Microsoft has lost the phone space
Microsoft has lost the car info-tainment space.
Microsoft has lost the server space
Microsoft has lost the mainframe space
Microsoft has lost the supercomputer space
Microsoft has lost the mobile app space
Microsoft has lost the table space
Microsoft has lost the Video Game Console space
Microsoft is LOSING the desktop space
Microsoft is LOSING the Office productivity space
Microsoft has......LOST
Unfortunately Microsoft has done the exact opposite of what would save the company. The world wants uncomplicated software that does not bog down their machines and spy on them all of the time.
Microsoft is so tied into the: "we want to control you and make it so heavy and complicated that the user can do nothing and therefore is forced to just take whatever bullshit is given them ... include massive Microsoft spyware and controls that Microsoft only allows itself to manage" mentality that they will kill the company.
The story goes that Bill Gates originally resisted the globalist and NSA pressure, but is now one of their most aggressive pawns.
Oh puuuhlease --- that advapi.dll was put in Windows OS waaaaay back!
,
Not just software, Microsoft's vastly over priced ergonomic mice and keyboards especially suck arse.
I'd still pay for excel, but only an older version of it.
Ehhhh.....not so fast. Overpriced? Absolutely. But I've found that lately, Microsoft mice and keyboards actually work without a hitch on my Linux boxes are all flavors....Red Hat, Suse, Ubuntu, Kubuntu and Linux Mint than some of the later models of Logitech. And you find more people in the Open Source world banging away patches and code for Microsoft controllers than others. The Xbox 1 and 360 controllers on Linux work great for gaming.
But still.....I agree with ya'
After all's said and done, Windows XP UI is still one of the best in class, as long as you never use the Internet without adblock/ghostery/abine/etc., and never install anything sketchy. My Win XP virtual machine on the mac for work is a screaming beast in that regard. Funny though, Firefox never wants to stay at 16.2 on the XP - it always finds a way to auto-upgrade to the latest version no matter what I do to prevent it.
Foxit PDF Reader and Notepad++ for Windows are two of the best engineering helper tools ever created.