Microsoft Lose Jobs – Netbooks to Blame

You may have read recently that Microsoft were planning to ‘lay off’ staff due to the financial issues resulting from the ‘credit crunch’ and the company not reaching it’s financial targets. Some 5,000 employees are expected to lose their jobs over the next 18 months or so. Well, it turns out that the credit crunch is only one of the reasons for those job losses – according to a 10-Q finance filing from Microsoft, part of the blame for the downturn in fortunes for the company lies with the popularity of netbooks.

A quote directly from the filing indicates the issue from the perspective of Microsoft:

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.

Many netbooks to date have been sold with an installation of OEM Linux or Windows XP and Microsoft have been hugely affected by this loss in licensing money to the tune of $465 million. Now with Windows 7 on the horizon which is expected to become popular for installation on netbooks, it will be difficult for Microsoft to make back their losses as they are unlikely to be able to charge a huge sum for OEM licensing of Windows 7 when netbooks themselves aren’t all that expensive themselves, as jkontherun points out.