Microsoft plans to cut 5,000 employees out of its workforce, starting with a 1,400 cut on Thursday. The company is making the move in response to unanticipated slowing economic activity and IT spending.
The company said in a statement "In light of the further deterioration of global economic conditions, Microsoft announced additional steps to manage costs, including the reduction of headcount-related expenses, vendors and contingent staff, facilities, capital expenditures and marketing. As part of this plan, Microsoft will eliminate up to 5,000 jobs in R&D, marketing, sales, finance, legal, HR, and IT over the next 18 months, including 1,400 jobs today. These initiatives will reduce the company's annual operating expense run rate by approximately $1.5 billion and reduce fiscal year 2009 capital expenditures by $700 million."
Chris Liddell, Microsoft's chief financial officer, added "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."
Microsoft's layoffs come as the company announced its second quarter earnings. The Windows OS maker reported a 2 percent increase in revenue, but an 8 percent decline in operating income, an 11 percent drop in net income, and a 6 percent EPS decline.
It appears that Microsoft plans to cut jobs across all divisions instead of limiting the layoffs to specific departments. The company did not, however, state whether or not it plans to reduce its Mac software development staff.