Microsoft axes 5,000 jobs

Microsoft on Thursday said its sales and earnings for the December-ending quarter fell well below expectations and announced a series of cost-cutting moves, including layoffs.

The software maker said it will cut 5,000 jobs over the next 18 months. About 1,400 jobs were eliminated immediately. The software maker is also paring other expenses, including delaying salary increases, and cutting back on vendors and contractors.

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Amid slow PC sales, revenue for the quarter came in at $16.63bn for the second quarter ended 31 December, up just two per cent from a year ago and at least $500m less than the company projected in October. Per-share earnings came in at 47 cents, also below forecasts.

Sales in the Windows unit were down eight per cent, amid not only a drop in PC unit sales but also a shift to lower-price netbooks, for which Microsoft receives less money. The drop in Windows sales was partially offset by strength in the company's server and Xbox divisions.

Microsoft CFO Chris Liddell said in a statement: "Economic activity and IT spend slowed beyond our expectations in the quarter, and we acted quickly to reduce our cost structure and mitigate its impact.

"We are planning for economic uncertainty to continue through the remainder of the fiscal year, almost certainly leading to lower revenue and earnings for the second half, relative to the previous year. In this environment, we will focus on outperforming our competitors and addressing our cost structure."

In its press release, the company said "due to the volatility of market conditions, going forward, Microsoft is no longer able to offer quantitative revenue and [earnings per share] guidance for the balance of this fiscal year". It said it expects its operating expenses to be about $27.4bn for the full year ending 30 June.

The layoffs are the first across-the-board reductions in Microsoft's ranks in its history, though it has cut jobs in certain areas or locations in the past. Although Microsoft plans to cut 5,000 jobs in total, its overall workforce is not expected to drop that much, as it continues to hire - albeit at a lower rate - in key areas.

The cost-cutting moves, which also include delaying raises and further cuts to its vendor and contractor ranks, should cut its annual operating expenses by $1.5bn and reduce fiscal year 2009 capital expenditures by $700m, Microsoft said.

Original article: Microsoft posts weak earnings, cuts 5,000 jobs from CNET News.com