PC Slump Prompts New Priorities, Investment Strategies

Facing a weak PC market and the longest sustained decline in its stock price since the company went public, Microsoft has announced new corporate priorities and hired a new senior vice-president to oversee its investment strategy.

Ballmer Outlines Priorities

In a memo sent to employees on Dec. 14, CEO Steve Ballmer acknowledged that a slowdown in PC sales (which are off nearly 20% compared to the last quarter of 1999) has affected Microsoft’s core businesses. Sent in the aftermath of Microsoft’s first earnings warning in more than ten years, the memo was meant to boost morale and refocus employees on the company’s core priorities for 2001, but it also signaled a possible reduction in the number of development projects and, perhaps, an earlier end of life for products currently shipping.

In a historically unusual step, Ballmer announced that he has asked his top subordinates to cut costs in their departments and focus development resources on the company’s most crucial strategic points. Although no specific details were given, products and projects outside of the company’s core focus may be spun off into separate ventures or sold (as happened with Expedia and Sidewalk), features may be cut from upcoming products (illustrated by the company’s recent decision to eliminate Office Designer and “Local Store” features for Office 10), and “older platforms” might be dropped earlier than planned. Ballmer also indicated the company will try to limit travel and entertainment expenditures, improve the purchasing process, and reduce building costs. He emphasized that no layoffs are planned, but indicated that many new positions might be left unfilled.