Microsoft Announces Layoffs

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Technology giant Microsoft has announced its first-ever employee layoffs. The software company will slash 1,400 positions, effective immediately, and expects to bring the number of cut positions up to 5,000 in the next 18 months. The layoffs will primarily impact the company’s finance, sales, legal, human resources, marketing, and R&D departments, and are expected to largely take place at the company’s Seattle-area main corporate campus. Microsoft expects the layoffs will save the company about $1.5 billion overall, and reduce fiscal 2009 operating expenses by roughly $700 million.

"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," said Microsoft CEO Steve Ballmer, in a statement. "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."

The news comes with the announcement that Microsoft’s profits were off 11 percent for its second fiscal quarter of 2009. Although it’s entertainment and devices division saw a 3 percent uptick in revenue (driven by holiday sales of the Xbox 360 console), client revenue declined 8 percent due to general weakness in the PC market. Microsoft’s servers and tools revenue grew by 15 percent, however, thanks to annuity licensing arrangements.

As of mid-2008, Microsoft employed over 91,000 people worldwide, which means 5,000 layoffs account for about 5.5 percent of Microsoft’s overall workforce. However, Microsoft also employes legions of contingent workers and contractors, whose positions are historically the first to be cut when the software giant tightens its belt. As a result, the impacts of Microsoft’s job cuts will likely extend far beyond the 5,000 positions currently on the chopping block.