Microsoft (MSFT) shares rose in pre-market trading Wednesday amid investor enthusiasm over the software titan’s announcement that it will slash 10,000 jobs, about 5% of its workforce.
CNBC commentator and Street.com founder Jim Cramer said that stock appreciation was unjustified, and investors apparently agreed. They sent the stock below Tuesday’s close just one hour into regular trading.
Microsoft recently stood at $237.63, down 1.13%.
Canning workers may cut expenses, but it doesn’t grow revenue and profit. The market was “rejoicing” over the news in pre-market trading, Cramer said on the air.
“But I’m not sure that’s going to be the case when we ask how is Microsoft going to get an upside surprise [in its Jan. 24 earnings report] if it’s laying off all these people.”
The company will take a $1.2 billion charge, or 12 cents per share, in the quarter ended Dec. 31 as a result of the layoffs. Analysts predict the company will post its weakest revenue growth in six years.
Demand Sags for Tech Products
The firings reflect a global economic slowdown that has dented demand for Microsoft’s products.
Cost discipline is a good thing, Cramer said. But, “I fear the layoffs are coming because when we see the [earnings] numbers, they will be disappointing.… I don’t know if we’re going to love it.”
Other big technology companies also are dumping workers in reaction to sluggish demand, with Amazon planning to axe 18,000.
All these layoffs are a sign of weakness, Cramer said. With the tech-heavy Nasdaq Composite index rising seven straight sessions until Wednesday, “I caution people that one day we’re going to wake up and say, wait a second,” Cramer said.
“You’re telling me that all these companies are laying off people, and we should still like the stocks going into earnings? That historically hasn’t been the right thing to do.”
