Microsoft Corp.is cutting as many as 5,000 jobs over the next 18 months, a sign of how badly even the biggest and richest companies are being stung by the recession.
The layoffs appear to be a first for the world’s largest software provider, aside from limited staff cuts made after acquiring companies.
Microsoft, which has founded in 1975 and has grown to about 91,000 employees—including 900 in Canada—announced the cuts as it reported an 11% profit drop in its latest quarter.
The Redmond, Wash.-based company said it earned $4.17 billion or 47 cents per share in its second quarter ended Dec. 31, down from year-ago earnings of $4.71 billion, 50 cents per share.
Revenue edged up two per cent to $16.63 billion, as software for corporate computer servers helped offset an 8% drop in sales of PC software.
The results missed Wall Street’s forecast for earnings of 49 cents per share on sales of $17.08 billion, and Microsoft shares fell 7% in early trading.
The company said it is being hurt by deteriorating global economic conditions and lower revenue from software for personal computers. The holiday quarter was the worst the PC market had seen in several years.
Microsoft said the job cuts will reduce operating costs by $1.5 billion as it prepares for lower revenue and earnings in the second half of the financial year. The company says it is unable to offer profit and revenue guidance because of the market volatility.
While cutting jobs in research and development, marketing, sales, finance, legal, human resources and IT functions, CEO Steve Ballmer said the company will “also open new positions to support key investment areas during this same period of time.”
Management also plans to cut travel expenses by 20% “and make significant reductions in spending on vendors and contingent staff,” Ballmer added.
It has also scaled back the expansion of the Puget Sound campus and reduced marketing budgets, and is eliminating merit pay increases that would have taken effect next September.
