Reality check on Microsoft layoffs

Speculation about possible layoffs at Microsoft has been swirling for weeks now in the Seattle tech community and online. We've been digging for information on this for a while, talking to people inside Microsoft and others familiar with the company. But so far, at least, we haven't been able to get any reliable information or direct confirmation.

That doesn't necessarily mean layoffs aren't coming. We're continuing to dig, and we welcome any and all tips. But it's worth noting that none of the online reports so far seem to be based on first-hand knowledge.

For example, a report this week on Fudzilla called a 17 percent Microsoft workforce reduction "no longer a rumor but a fact," but the site didn't cite a source or even give a general sense for where it got the information.

Silicon Alley Insider's Henry Blodget yesterday called a cut of that magnitude highly unlikely. "Unless Microsoft's business has been absolutely crushed in the past two months, there is no reason for the company to suddenly cut this much cost."

The anonymous Mini-Microsoft employee blogger, who two weeks ago fueled the layoff rumors, is now highlighting a series of comments that appear to put a damper on the speculation.

As we noted in this morning's 2009 Microsoft preview, the company is seeking to cut hundreds of millions in expenses. Steve Ballmer told shareholders in November that headcount growth will be much slower this year and probably next. The company has consistently declined to comment when asked about the possibility of layoffs.

If the company reduces its workforce, Microsoft's contractors and vendors could be among the most vulnerable. The company doesn't report those workers as part of its employment numbers, so the cutbacks wouldn't be as public. The Seattle Times' Ben Romano reported this week that he's "heard from a handful of contractors whose contracts at Microsoft were abruptly cut short."

In the end, Microsoft may try to cut expenses through something more nuanced than a huge layoff. Matt Rosoff, an analyst at the Kirkland-based Directions on Microsoft research firm, offered this via email: "I wouldn’t be surprised to see a reorganization in which certain groups are eliminated or split apart, with some projects canceled or scaled back as a result."