Microsoft cuts 5,000 jobs, with net profits down 11% on previous year

Posted by Katherine Hannaford on Thu 22 Jan 2009

5.5% of Microsoft staff to be made redundant

Think the credit crunch is hitting you hard, because you can no longer afford to buy lunch at work anymore? Spare a thought for the 1,400 staff at Microsoft, who just got made redundant today as the company cited the recession and low earnings in the last financial quarter.

While Apple posted its "best quarterly revenue and earnings in Apple history" last night, Microsoft today said up to 5,000 jobs will be cut in the next 18 months, amounting to 5.5% of the company. 1,400 of those are as of today, with Chris Liddell, Microsoft's chief financial officer, claiming "Economic activity slowed beyond our expectations in the quarter, and we acted quickly to reduce our cost structure and mitigate its impact."

These job cuts come after Microsoft announced a net profit of $4.17 billion for the last three months of 2008, which was down 11% on the previous year, and less than expected by analysts. Cutting the 5,000 jobs will result in $1.5 billion saved in operating expenses, and $700 million in 2009 capital expenditure. Of the 5,000 jobs being axed, it's believed less than 2% of the 2,900 UK Microsoft staff will be affected.

"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," Liddell said in the Microsoft statement.

Whilst sales of Vista were slow, Xbox 360 sales increased by 3% when compared to the last quarter of 2007. Upon hearing the news, shares in Microsoft fell by 7.9% today.

A black day for Microsoft, however an even worse one for the 5,000 employees who will be let go from the company. Perhaps they should hit up Apple for jobs, who've made $10 billion in quarterly revenue for the first time ever, according to CEO Steve Jobs.

Link: Microsoft (via BBC News)