I'd actually like to take a step back from the hate-fest going on in the comments here and evaluate this. Before you downvote me, at least read what I have to say.
This email is a classic example of poor communication. It's very clear that the guy is frustrated and is taking it out via an emotional response. However, we don't know the whole story here, do we? From my reading, it sounds like this has been an ongoing problem for awhile now. Keep in mind that this was in 2001, not exactly an easy time to be running a software company. I can imagine the frustration of running a large company with thousands of employees and seeing a lack of results, coupled with evidence of employees not spending much time at work. What would you do in such a case? Not necessarily with regard to the email, which I think we can all agree was in poor taste, but with regard to the actions he says he's going to take.
Additionally, we don't know if this memo did in fact kill morale at the company. We know that the company has done well over the last nine years, and that Mr. Patterson was recently honored as one of the best bosses in the country. The Wikipedia entry specifically mentions the metric of great performance relative to compensation, so he's obviously creating value.
I guess my point is that everyone makes mistakes, especially when they're frustrated and facing a large problem. And make no mistake, managing a software company with several thousand people in 2001 would be a challenge. I'm not saying this was the right approach, but what exactly would you do? And more importantly, if you've never faced management at that scale, why do you think it would be more effective than his approach?