Where are the Microsoft cuts falling?

Already, over on Mini-Microsoft's virtual water cooler blog, word is swirling about which teams at Microsoft are bearing the brunt of the 5,000-person layoffs announced on January 22.

I'm hearing from my sources that the Entertainment and Devices (E&D) unit -- the group that is responsible for Xbox, Zune and Windows Mobile -- is being hit with the bulk of the immediate 1,400-person cuts. (I have no specifics  about how this will affect Microsoft's product roadmap, but stay tuned.)

Anonymous commenters on Mini's blog claim that the Online Services and Microsoft Business unit (the home of Office and Dynamics CRM/ERP) are bearing some of the cuts. One said that Global Foundation Services, under Debra Chrapaty, will be cutting some jobs. For its second quarter for FY 2009, Microsoft's Online Services unit reported an operating income loss of $471 million, compared to $247 milion for the same three-month period in FY 2008.

One anonymous poster said that Windows Engineering chief Steven Sinofsky sent out a memo this morning saying that no one in the Windows client team will be cut (in spite of the Client division's eight percent drop in revenues in the second fiscal quarter that was announced today).

(Note: Folks on Mini's blog are claiming they are hearing about the cuts via e-mail from their individual managers. But there is no way of knowing if these reports are actually from real Microsoft employees, as most remain anonymous.)

Microsoft CEO Steve Ballmer, during his earnings call with press and analysts today, told company watchers that Microsoft won't be shrinking in its fiscal 2010 (which begins July 1), but Microsoft is "putting the brakes on" spending and hiring.

Ballmer noted that even though Microsoft is cutting 5,000 jobs over the next 18 months, it will be "adding a few thousand jobs back... like in search." (So much for those who thought Microsoft might/should get out of the search business and refocus its attention on its older, core businesses....)

Ballmer also said Microsoft will be cutting outside contractors as deeply, if not more so, than it is cutting internal employees. The 5,000-jobs-cut figure does not incorporate any of the outside vendors employed by many Microsoft business units, but cuts will be coming there, too, Ballmer said.