Yes, Virginia, it's true. First rumored in early January, but at 3x the number, there are indeed layoffs happening at Microsoft. The number set to join the employment rolls is 5,000, as revealed in Microsoft's earnings statement for fiscal Q2 2009, released before market opening on Thursday.
1,400 jobs will be slashed immediately. The remaining 3,600 jobs will be pared over the next 18 months. According to Microsoft, this will reduce the company’s annual operating expense run rate by approximately $1.5 billion and fiscal year 2009 capital expenditures by $700 million.
Wall Street had forecast earnings of $0.49 per share on sales of $17.08 billion. Microsoft's results missed that handily, with revenue of $16.63 billion and earning per share of $0.47. The revenue was still up 2% increase from a year ago, but the EPS was down 6%.
Microsoft said it is unable to offer profit and revenue guidance for the rest of the fiscal year, due to market volatility.
Microsoft CEO Steve Ballmer said:
"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."
CFO Chris Liddell 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. 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."
It might be good for these, and other executives to read this excellent Business Week article, Corporate America, Swing Your Ax Wisely, which notes that:
"The idea of a company that's earning money ... to have cutbacks just so they can earn another $12 million or $20 million or $40 million in a year when no one's counting is really a horrible act when you think about it on every level."
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