Microsoft’s belt-tightening is the most recent signal of the financial occasions

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Microsoft executives Brad Smith, Satya Nadella and Amy Hood take questions from shareholders at the company’s annual meeting in 2018. (GeekWire File Photo / Nat Levy)

“As we manage through this period, we will continue to invest in future growth while maintaining intense focus on operational excellence and execution discipline.” — Amy Hood, Microsoft chief financial officer, July 2022.

“Given the choice, we prefer weenies over shrimp.” — Mike Murray, then Microsoft’s head of human resources, May 1993.

Those two comments from Microsoft leaders are separated by nearly three decades and two very different styles of communication, but the underlying message is the same: save money when you can, people.

A report by the Wall Street Journal this morning says Microsoft is “asking teams across the company to rein in some employee expenses,” such as business travel and gatherings. The report cited, as an example, a recent picnic for one Microsoft team where managers paid for the food and drinks personally rather than expensing the cost.

Hood’s comments above came from the Microsoft’s fiscal fourth-quarter earnings conference call, explaining the company’s approach to financial analysts. People inside the company say she reiterated the point at an internal meeting to start the fiscal year, asking employees to think hard before spending Microsoft’s money.

The report brought to mind the legendary “Shrimp vs. Weenies” memo from Microsoft’s past.

Fast-forward to mid-2022, and it’s the latest example of tech companies looking to rein in expenses in the face of economic uncertainty, as they prepare for the possibility of a recession or financial downturn.

Microsoft made a round of layoffs to start the fiscal year, and eliminated many of its open positions. As part of the belt-tightening, the company is also reportedly making cutbacks in its Modern Life Experiences (MLX) group.

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The MLX group includes Microsoft’s Family Safety parental controls, which was reportedly hit by layoffs, but Mary Jo Foley of ZDNet reports that Microsoft is not suspending that service.

Before the cutbacks, the company added a record 40,000 employees in its most recent fiscal year. Another 11,000 hires are starting in the first quarter, primarily in cloud engineering, LinkedIn, customer deployment and commercial sales, Hood told analysts on the conference call. Beyond that, however, growth is expected to slow significantly.

Microsoft’s revenue was up 12% in its recent quarter, to $51.9 billion, with profits up 2% to $16.6 billion, missing Wall Street’s expectations on both financial measures.

Listen to the latest episode of the GeekWire Podcast below for more on the economic outlook for Microsoft and other large tech companies.

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