Microsoft Reports Results, will Slash 5000 Jobs

Microsoft today announced its financial results for the fourth calendar quarter of 2008: The company earned $5.94 billion on revenues of $16.63 billion, the latter of which was up just 2 percent compared to the same quarter one year ago. Microsoft now says that it will lay off 5000 employees over the next 18 months, including 1400 immediately.

The announcement came before the start of business today, rather than after the close of the stock market as is custom. Microsoft has offered no explanation for the change.

"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," Microsoft CEO Steve Ballmer said. "We will continue to manage 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."

For the first time in recent memory, revenues from Microsoft's Windows client business declined, by 8 percent. The company noted that "PC market weakness and a continued shift to lower priced netbooks," the latter of which bring in less revenue per-machine, were to blame for the shortfall. Microsoft's server business jumped 15 percent, while the Entertainment and Devices business--responsible for the Xbox 360--rose 3 percent.

Looking forward, the software giant says that upcoming products like Windows 7, Windows Azure, Office Web Applications, and Windows Server 2008 R2 showed that innovation was alive and well at the company.

The big news, of course, is the layoffs. Microsoft says that it is taking steps to manage costs in light of the worldwide economic slump, which includes "the reduction of headcount-related expenses, vendors and contingent staff, facilities, capital expenditures and marketing." It will eliminate 5000 jobs in research and development, marketing, sales, finance, legal, HR, and IT over the next 18 months. The cost of implementing employee severance will be included in the results for the current quarter. But the job cuts should reduce operating costs by $1.5 billion overall, Microsoft says.

"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 Microsoft CFO Chris Liddell. "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."

Finally, because of the volatility of the market, Microsoft says it can no longer offer accurate financial guidance for the rest of its fiscal year, which ends in June 2009.

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