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Microsoft's Job Cuts Are Finally Getting the Company to Think Straight

Stocks in this article: MSFTHPQGOOGGOOGLAAPLORCLIBM

The layoffs have come with the backdrop of a larger trend in the industry in which struggling PC-focused companies, such as Hewlett-Packard (HPQ), have been cutting down costs in order to boost profits amid a lack of top-line growth. But Bowker, has said that when it comes to Microsoft, the layoffs are largely driven by "bigger internal events" and not by macro trends. Similarly, Adrian believes that "Microsoft's restructuring is addressed at its view of a changing market opportunity that demands it invest and staff according to that vision."

The job cuts can make Microsoft more efficient. In fiscal 2013, Microsoft was behind Google (GOOG) and Apple (AAPL) in terms of revenue and profits per employee, a metric which is often used to measure efficiency.

The layoffs will bring down the size of its workforce, giving a boost to the company's revenue and profit per employee. Microsoft's revenue and profits are expected to increase by 18.2% and 6.32%, respectively, for the fiscal year ending June 2015, as per analysts' estimates compiled by Thomson Reuters.

Microsoft has not given any details on annual cost savings that will be generated by the 18,000 job cuts. Analysts' estimates on the company's profits might change once this information is available.

Following the cuts, Adrian has said Microsoft will double down on sectors where it is seeing momentum, such as information management and security.

Microsoft is facing increasing competition from Oracle (ORCL) in cloud computing.

According to Gartner's estimates, last year, the software giant was the biggest global software vendor, ahead of Oracle, which has risen quickly in cloud computing, dislodging IBM (IBM) from the second spot. But under CEO Satya Nadella's leadership Microsoft's "cloud growth should also continue, even with the added competition," Adrian predicted.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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