No layoffs at Microsoft despite major cost-cutting in 2009

A CNBC report out today appears to put to rest continued rumors of significant Microsoft layoffs coming this month. At the same time, the company will embark on a significant cost-cutting initiative in 2009, which might begin as early as this month, to offset a global slowdown in sales.

In recent weeks, two blogs, Mini-Microsoft and Fudzilla, have both reported that Microsoft is preparing to lay off large numbers of employees before the company announces its second quarter earnings on 22 January. Neither blogger quoted inside sources and both later backtracked.

Fudzilla, for instance, said in its initial report that Microsoft was considering cutting up to 17 per cent of its "90,000 employees," a number that seemed to refer to the 95,768 employees directly employed by the company. That number does not include contractors.

In a more recent report, Fudzilla backtracked saying, "There's a big chance that a large chunk of the 17 per cent figure could come out of the agency staff." "Agency staff" refers to contractors. Mini-Microsoft, which initially wrote about a 10-per cent layoff but admitted he was simply reporting on "rumors and second-hand speculation," followed up with a post titled, "No Layoffs at Microsoft."

In any case, CNBC reports that while Microsoft will "embark on significant cost-cutting ... the cuts will largely be handled through attrition and the non-renewal of contract employees, rather than through a rumored, sweeping layoff." A Microsoft source told CNBC that the speculation is "grossly exaggerated," but added that "any company not paying careful attention to headcount in a climate like this is nuts."

One of the units already seeing cutbacks is Microsoft's sagging browser business. A report in the Seattle Times says 180 contract workers were told last month that their services would not be renewed.

Many tech companies have announced sweeping layoffs recently, including Hewlett-Packard, Sun Microsystems, Applied Materials and National Semiconductor. It appears, however, that Microsoft will be following the strategies set forth by Cisco Systems and Google, instituting cost-cutting measures like travel restrictions and hiring slowdowns or freezes, rather than across-the-board cuts.