Microsoft Will Cut 5,000 Jobs Over Next 18 Months

Microsoft announced it will cut up to 5,000 jobs — including 1,000 today — in R&D, marketing, sales, finance, legal, HR, and IT over the next 18 months.

Microsoft says the cuts, which will be about 5 percent of its workforce, will reduce expenses by about $1.5 billion and fiscal 2009 expenditures by $700 million. While Microsoft has cut jobs in the past, these are the first across-the-board reductions in company history.

Here's the statement from CEO Steve Ballmer:

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.

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.

Ballmer informed employees of the layoffs via email. Here's a portion: (Read the entire email on CNET)

Our leaders all have specific goals to manage costs prudently and thoughtfully. They have the flexibility to adjust the size of their teams so they are appropriately matched to revenue potential, to add headcount where they need to increase investments in order to ensure future success, and to drive efficiency.

To increase efficiency, we're taking a series of aggressive steps. We'll cut travel expenditures 20 percent and make significant reductions in spending on vendors and contingent staff. We've scaled back Puget Sound campus expansion and reduced marketing budgets. We'll also reduce costs by eliminating merit increases for FY10 that would have taken effect in September of this calendar year.

Each of these steps will be difficult. Our priority remains doing right by our customers and our employees. For employees who are directly affected, I know this will be a difficult time for you and I want to assure you that we will provide help and support during this transition.

Microsoft, which showed the beta version of its Windows 7 operating system at CES 2009, released the following financial results for its fiscal second quarter ended Dec. 31, 2008:

• A 2 percent increase in revenue to $16.63 billion
• Operating income, net income, and diluted earnings per share were $5.94 billion, $4.17 billion and $0.47, declines of 8 percent, 11 percent and 6 percent, respectively
• Client revenue declined 8 percent

"Economic activity and IT [spending] slowed beyond our expectations in the quarter, and we acted quickly to reduce our cost structure and mitigate its impact," says 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."