Microsoft pink-slips 5000 staff, despite profits

22 January 2009

Microsoft Corp today shocked Wall Street with disappointing results and said it would cut 5,000 jobs or about 5 per cent of its and stop offering profit forecasts for the rest of the fiscal year, even as it posted a profit of $4.17 billion, or 47 cents per share, in its fiscal second quarter ended December 31, versus a profit of $4.71 billion, or 50 cents, a year earlier.

Analysts were looking for earnings per share of 49 cents. Revenue rose 2 per cent to $16.63 billion, missing the average analyst forecast of $17.1 billion.

Its job cuts amount to roughly 5 per cent of its estimated 95,000 work force. The company said the job cuts would reduce operating costs by $1.5 billion as it prepares for lower revenue and earnings in the second half of the year.

The software giant said the moves were driven by deteriorating global economic conditions and lower client revenue, resulting from weakness in the PC market and a shift to lower-priced notebook models.

The job cuts bely earlier reports that Microsoft's cost-cutting plans would not involve a major sacking of staff and will take place over over the next 18 months, including 1,400 jobs today.

Microsoft's first-ever companywide firings will take place in nearly all areas, including research, sales and marketing, the company said in a statement on Thursday. The measure, announced with the company's second-quarter earnings, will save $1.5 billion, Microsoft said.

The global recession has not spared the computer industry, and chief executive officer Steve Ballmer is under pressure to reduce costs as sales growth dries up. The company's Windows division, which accounts for about a quarter of sales, is suffering after personal computer shipments rose at the slowest rate in six years in the fourth quarter.