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Microsoft to cut 5,000 jobs

by Scott Bicheno on 22 January 2009, 15:28

Tags: Microsoft (NASDAQ:MSFT)

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It’s the economy again

A widespread rumour in the build-up to Microsoft's quarterly earnings announcement was that it was going to cut some jobs - and so it has.

With the sadly familiar refrain of "In light of the further deterioration of global economic conditions," the software giant wants to reduce annual expenses by $1.5 billion in the long term and by $700 million this year.

A big part of this push will be the axing of "up to" 5,000 jobs over the next 18 months across the company, which amounts to five percent of the workforce. Remarkably, 1,400 of those redundancies are happening today.

Microsoft's results were hardly disastrous; it still managed a two percent year-on-year increase in quarterly revenue, to $16.63 billion. However, net income was a mere $4.17 billion, down 11 percent on the same quarter last year.

The weakest segment appears to have been client. Poor sales of PCs and a shift towards netbooks, which use either cheaper versions of Microsoft's Windows operating system or Linux, contributed to an eight percent fall in revenue.

CEO Steve Ballmer's comments followed the script used by the other companies announcing job cuts: "While we are not immune to the effects of the economy, I am confident in the strength of our product portfolio and soundness of our approach," he said. "We will continue to manage expenses and invest in long-term opportunities to deliver value to customers and shareholders, and we will emerge an even stronger industry leader than we are today."

Microsoft also followed the trend of declining to offer future revenue guidance, due to the volatility of market conditions. Its shares are currently down around eight percent on yesterday's close.