Microsoft Cuts Hit Home in City That Loves $1,599 Carbon Bikes
By Peter Robison
Jan. 23 (Bloomberg) -- Matt Chapman’s bicycle shop east of Seattle always gets a sales boost in summer. Not because of the weather. It’s when Microsoft Corp.’s interns arrive, carrying $300 checks from their employer for transportation.
“Three hundred dollars goes a long way toward an inexpensive bike and a helmet,” said Chapman, 22, a sales associate at Performance Bicycle Shop, a short ride from Microsoft’s campus in Redmond, Washington. For older employees, the $1,599 carbon-fiber Scattante CFR is a top seller, he said.
After the world’s largest software maker made its first companywide job cuts yesterday, the local businesses that rely on the spending power of Microsoft’s workforce and company subsidies on such items as gym memberships are bracing for bumps.
“We count on them,” said Redmond rental consultant Sheryl Rodriguez, after sending a newly hired Microsoft worker and his mother off to look at apartments yesterday morning.
Rodriguez rents furniture and handles relocations for Cort, a unit of Omaha, Nebraska-based Berkshire Hathaway Inc., and she estimated 30 percent of its Redmond business comes from Microsoft. Sales already started slumping in November, she said.
Co-founded by Seattle native Bill Gates 34 years ago, Microsoft helped the city diversify its national identity from airplanes and logging. In the 1990s, its stock rose so much that some employees quit and started boutiques or motorcycle shops.
5,000 Jobs
Microsoft is eliminating as many as 5,000 jobs and 5,000 or more contract workers. It said 1,400 jobs would be cut yesterday, most in the Seattle area, where it employs 41,480. The company said it will still add workers in some areas for a net reduction of 2,000 to 3,000 jobs.
Investors want the company to reduce costs further, said Sid Parakh, an analyst at McAdams Wright Ragen in Seattle.
“It doesn’t have to be job cuts; it can be marketing expenses, it can be different sources,” he said. “Everyone across the board in technology is taking pretty sharp cuts, and Microsoft could do more.”
On the foggy Redmond campus yesterday, cranes towered overhead and cement trucks rumbled past to complete an expansion Microsoft began in 2005. Young Microsoft workers in gloves and long pants sweated through a pickup soccer game.
Others walked to the nearby Pro Sports Club, which has wood- paneled lockers, four pools and its own florist. Microsofts pays for employees to work out there. A private membership costs $135 a month.
“Microsoft is a big part of every business around here,” said club president Dick Knight. “At this point, we don’t know what the effect would be on us.”
Freezing Salaries
In an e-mailed statement, Microsoft said cuts to employee benefits are not part of the current round of cost reductions. In addition to job cuts, Microsoft is freezing salaries, paring travel costs 20 percent, delaying parts of its campus expansion and reducing spending with vendors.
Software had been one of the few industries adding jobs in Washington state.
After outperforming the U.S. economy much of last year, the state’s unemployment rate hit 7.1 percent in December, almost matching the 7.2 percent national rate, the state Employment Security Department said this week. The increase from 6.4 percent in November was the largest monthly jump since 1976.
“Microsoft is yet another indicator that tough times are here, and no company will emerge untouched,” Seattle Mayor Greg Nickels said in a statement.
To contact the reporter on this story: Peter Robison in Seattle at robison@bloomberg.net.
Last Updated: January 23, 2009 00:01 EST |
