Microsoft CEO sets business priorities

In the wake of slumping revenue forecasts, Microsoft Corp. CEO Steve Ballmer Tuesday held a virtual company meeting for employees to discuss the company’s business priorities.

The meeting followed a company memo, issued late last week, in which Ballmer detailed the company’s strategy and “efforts to eliminate unnecessary expenses.” Ballmer told employees that he expects them “to reduce planned expenditures very significantly, both in the short term and the longer term.”

The memo was sent to employees last Thursday, the same day that Microsoft reported lower revenue expectations. But despite the memo’s timing, Microsoft spokeswoman Beth Jordan said the memo was “not horribly unusual.”

“Steve sends e-mails out to the employees of Microsoft reasonably routinely,” Jordan said, adding that the memo was intended to serve as a year-end wrap-up and look forward to the coming year in terms of priorities and strategy.

Jordan said that Ballmer didn’t launch any “huge initiative” within the company to reduce costs.

As part of the overall belt-tightening, Ballmer did note in the memo that he has asked his direct reports “to significantly reduce our resource investments versus the FY 01 Plan.”

“Although we are a profitable company with good growth prospects, we do not have the financial resources, the people or the interest in doing things that are not consistent with our priorities,” Ballmer wrote.

His priority scenarios include Windows PCs and the .Net platform software as “the foundation going forward (see story).” On top of that are productivity software, enterprise servers and tools, Microsoft Network (MSN), non-PC devices and business applications for small and medium-size organizations.

He told employees that the company would “continue being a lot more decisive about NOT doing certain things.”

“Decisions to spin off Expedia (Inc.), sell our interest in Sidewalk, create new joint ventures for our CarPoint and HomeAdvisor properties, and close down our efforts around TaxSaver and Microsoft Learning Technologies are examples of where we have gotten crisper about our priorities,” Ballmer wrote.

Ballmer also noted a recent decision to “not ship the Local Web Storage system with Office 10” in order to focus energy on a database server code-named Yukon, the next release of SQL Server. He said that while Yukon is two years or so off, it “will be key to our next-generation storage, database, file system, e-mail, and user interface work.”

He called Yukon a core .Net and Windows technology and told employees that “we will ask all development groups to organize their product plans to have new versions available in that timeframe based on Yukon and our .Net programming model.”

At the same time, Ballmer was careful to let employees know that hiring “great new people” and investing in employees remains a “super high priority.”

“To be clear, resource reductions don’t translate into employee layoffs,” Ballmer wrote. “As we focus on our top priorities we will reduce unfilled headcount.”

A Microsoft spokeswoman confirmed that the company currently has roughly 5,600 unfilled positions. Microsoft currently employees 42,000 worldwide. Ballmer told employees, via the memo, that the majority of employees will be reviewed in the next month for base salary increases, or for salespeople, an increase in bonus opportunity.

Keeping with the topic of cost containment, Ballmer also said the company will “get a better handle on discretionary expenditures like travel and entertainment,” strengthen “the review and approval process for large-scale expenditures” and do more to “standardize purchasing and reduce building construction costs.”