Microsoft will eliminate up to 5,000 jobs in research and development, marketing, sales, finance, legal, human resources and information technology (IT) over the next 18 months, including 1,400 jobs on Jan. 22.
In a press release issued Jan. 22, Redmond-based Microsoft Corp. announced that it is taking “steps to manage costs, including the reduction of headcount-related expenses, vendors and contingent staff, facilities, capital expenditures and marketing.”
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.
“Economic activity and IT spend slowed beyond our expectations in the quarter and we acted quickly to reduce our cost structure and mitigate its impact,” said Chris Liddell, chief financial officer at Microsoft.
“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.”
While announcing its second-quarter results, as of Dec. 31, 2008, Microsoft reported revenue of $16.63 billion, a 2 percent increase over the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $5.94 billion, $4.17 billion and $0.47, declines of 8 percent, 11 percent and 6 percent, respectively, compared with the prior year.
Client revenue declined 8 percent as a result of PC market weakness and a continued shift to lower priced netbooks. However, strong annuity licensing drove Server & Tools revenue growth of 15 percent. Entertainment and Devices revenue grew 3 percent, driven by strong holiday demand for Xbox 360 consoles, with a record six million units sold in the quarter.
“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 Steve Ballmer, chief executive officer at Microsoft. “We will continue to manage our expenses and invest in long-term opportunities to deliver value to customers and shareholders and we will emerge an even stronger industry leader than we are today.”
