Microsoft to reduce staff by 5,000 because of netbooks

ms-logoWe have been warning everyone for months that the mass appeal of low-cost netbooks was going to hit the major players hard.  You’ve probably heard today that Microsoft plans to lay off 5,000 employees over the next 18 months due to the hard times.  Details are emerging that OEM revenue, that licensing money Microsoft gets for each computer sold, has taken a huge $465 million hit.  This hit is due to the popularity of netbooks that usually have either Linux or cheap Windows XP installed.  From the Microsoft 10-Q filing:

“The decline in OEM revenue reflects an 11 percentage point decrease in the OEM premium mix to 64%, primarily driven by growth of licenses related to sales of netbook PCs, as well as changes in the geographic and product mixes.

We have also been warning that having Windows 7 become the preferred operating system for netbooks would continue to hammer Microsoft’s revenue picture and this warning is now very distinct.  There is no way they can charge a big licensing fee to OEMs for a $300 netbook and it will be interesting to see how this shakes out when Windows 7 is released later this year.

The layoffs are expected to come from Microsoft’s Entertainment and Devices segment affecting Zune, Xbox and Windows Mobile.  This could be a hit in the Windows Mobile evolution depending on how these cuts are leveed.  It’s a sad day for us mobile geeks.

(via All About Microsoft)


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