Microsoft to Ax 5,000 Jobs, Reports 11 Percent Loss in 2Q Profit

Published January 22, 2009

| Associated Press

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.

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.

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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.

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