Microsoft to cut 5,000 jobs

The official word on layoffs is out: Microsoft is going to cut 5,000 jobs over the next 18 months, 1,400 of them today, January 22.
Written by Mary Jo Foley, Senior Contributing Editor on

The official word on layoffs is out: Microsoft is going to cut 5,000 jobs over the next 18 months, 1,400 of them today, January 22.

From the company's Q2 earnings release:

"Microsoft will eliminate up to 5,000 jobs in R&D, marketing, sales, finance, legal, HR, and IT over the next 18 months, including 1,400 jobs today. These initiatives will reduce the company’s annual operating expense run rate by approximately $1.5 billion and reduce fiscal year 2009 capital expenditures by $700 million."

I was predicting the Softies were going to get by simply by shuffling folks around and quietly closing groups. It sure seemed like there were a lot of places where the fat could be trimmed. But I was wrong.

That said, the 5,000 cuts are not as severe as many had been predicting. Rumors had Microsoft cutting 8,000 to 15,000 or more jobs out of a total worldwide employee roster of 96,000.

Microsoft also is announcing as part of its cost-cutting measures, including "the reduction of headcount-related expenses, vendors and contingent staff, facilities, capital expenditures and marketing."

Other tidbits from today's earnings news:

* Microsoft’s second quarter earnings, the company reported net income of $4.17 billion, or 47 cents a share, on revenue of $16.63 billion, up only 2 percent from a year ago. Wall Street was expecting earnings of 49 cents a share.

* "Due to the volatility of market conditions going forward, Microsoft is no longer able to offer quantitative revenue and EPS (earnings per share) guidance for the balance of this fiscal year. Microsoft offers operating expense guidance of approximately $27.4 billion for the full year ending June 30, 2009."

* Revenue for Windows client -- one of Microsoft two biggest cash cows --  declined eight percent for the quarter "as a result of PC market weakness and a continued shift to lower priced netbooks." The bright spots for Q2: SQL Server, Windows Server and Xbox 360.

* In the past 12 months, Microsoft's headcount grew 14 percent.

In Microsoft's 10-Q filing with the SEC, the company provided more specifics on how it plans to cut employee-related expenses:

"The net headcount in these functions is expected to decline by 2,000 to 3,000 over the next 18 months. Merit increases will be eliminated for employees in fiscal year 2010. Operating expenses will be reduced by cutting travel expenditures, reducing spending on vendors and contingent staff, reducing marketing spending, and scaling back capital expenditures. These initiatives will reduce our annual operating expense run rate by approximately $1.5 billion. These plans are being finalized, and the costs of implementation and employee severance will be included in our third quarter results of operations"

Editorial standards