Thursday, January 22, 2009

5,000 Employees to be Laid Off in Microsoft

Microsoft Corp. said Thursday it is cutting 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 Microsoft, which was founded in 1975, aside from relatively limited staff cuts the software company made after acquiring companies.

Just review the documented occasions over the past decade when the company has trimmed jobs through reorganizations and other changes.

June 2006: 148 positions in the U.S. sales group, including 98 in Redmond, were cut to "better align a small subset of field and headquarter positions more closely with the needs of our enterprise customers and partners."

September 2004: 93 positions in the Windows Server group eliminated as the company automated more testing. 44 new positions were created at the same time.

August 2004: 76 positions were cut in the Xbox group as Microsoft closed its sports video game studio. It was part of a broader reduction of the company’s game creation efforts as third-party studios began developing more titles for the original Xbox.

June 2004
: 20 recruiting positions were eliminated as part of human-resources department restructuring.

January 2002
: 168 positions were lost when Microsoft pulled the plug on its UltimateTV effort. It was described at the time as one of the largest layoffs in Microsoft’s 27-year history.

January 1998
: 30 to 40 full-time workers at 10 Sidewalk city guides offices were cut as the company learned to operate the effort more efficiently, a spokesman said. The company planned to expand the online guides to more cities in subsequent years.

January 1996: 120 employees at a Bothell floppy-disk manufacturing plant were given layoff notices as more software was being produced on CD-ROM.

But also remember that during the same period -- 1996 to 2008 -- Microsoft has grown total worldwide employment more than 340 percent from 20,561 to 91,259 as of June 30. The hiring continued through the latter half of 2008, albeit at a slower rate. As of November, Microsoft counted 95,664 employees globally.

Based on the numbers and historical data, 5% workforce cut is a unusual business step for Microsoft, caused by unusually poor market conditions.

The company announced the cuts as it reported an 11 percent drop in second-quarter profit, which fell short of Wall Street’s expectations. Microsoft shares plunged 7 percent in pre-market trading.

Microsoft said it was being hurt by deteriorating global economic conditions and lower revenue from software for PCs. The holiday quarter of 2008 was the worst the PC market had seen in several years.

The Redmond-based company says profit slipped to $4.17 billion, or 47 cents per share, from year-ago earnings of $4.71 billion, or 50 cents per share.

It says total revenue edged up 2 percent to $16.63 billion, as software for corporate computer servers helped offset an 8 percent drop in revenue for PC software.

The results missed Wall Street’s forecast for earnings of 49 cents per share on sales of $17.08 billion.

Microsoft says 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 year. The company says it is unable to offer profit and revenue guidance for the rest of the year, because of the market volatility. “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,” said Christopher P. Liddell, the company’s chief financial officer.

Microsoft is not alone among the software giants who experience difficult times at the moment. Many tech companies are struggling. Intel recently announced plans to lay 6,000 people off because demand for personal computers has dropped. IBM, which yesterday reported better-than-expected results, also reportedly continues to trim staff. Google also is reportedly starting to pinch pennies, laying off 100 recruiters and closing some engineering offices.

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