Microsoft announced its second-quarter financial results on Thursday, with a headline revenue figure of $16.38bn. The total is just two percent up on the same quarter last year, and five percent below predictions.
The Redmond-based software maker said it would lose 5,000 jobs over the next 18 months, with 1,400 layoffs effective immediately, aiming at a yearly cost reduction of $1.5bn (£1bn).
"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," said Microsoft chief executive Steve Ballmer in a statement.
Client revenue declined eight percent "as a result of PC market weakness and a continued shift to lower-priced netbooks", the statement said. "Strong annuity licensing drove Server and Tools revenue growth of 15 percent."
The company said it was withdrawing "quantitative revenue and EPS [earnings per share] guidance for the balance of this fiscal year", due to the volatility of market conditions.
"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," said Chris Liddell, Microsoft's chief financial officer.