US software giant Microsoft announced the most sweeping job cuts in its history on Thursday as a worsening economy and weak spending on technology sent quarterly profit sharply lower.
Releasing its results for the second quarter of its fiscal year, Microsoft said it was cutting up to 5,000 jobs, or 5.5 percent of its workforce, over the next 18 months.
The Redmond, Washington-based company said net profit fell by 11 percent in the quarter from a year ago to US$4.17 billion on a revenue of US$16.63 billion, a 2 percent rise from a year ago.
It said earnings per share were US$0.47 for the quarter that ended on Dec. 31, less than the US$0.49 per share forecast by analysts.
“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 chief executive Steve Ballmer said 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.”
Ballmer’s reassuring words failed to prevent Microsoft’s shares from plunging on Wall Street, where they lost 11.71 percent to close at US$17.11.
“In light of the further deterioration of global economic conditions,” Microsoft said it was eliminating “up to 5,000 jobs in R&D [research and development], marketing, sales, finance, legal, HR [human resources], and IT [information technology] over the next 18 months, including 1,400 jobs today.”
Microsoft employs some 91,000 people and rumors of job cuts at the world’s biggest software firm had been circulating for weeks.
The company said the move was among various steps designed to manage costs, “including the reduction of headcount-related expenses, vendors and contingent staff, facilities, capital expenditures and marketing.”
“These initiatives will reduce the company’s annual operating expense run rate by approximately US$1.5 billion and reduce fiscal year 2009 capital expenditures by US$700 million,” Microsoft said.
In a conference call with reporters and analysts, Ballmer said he did not expect a “quick rebound” for the economy.
“The economy shrinks and then it grows from a lower base. So no, I’m not expecting a bounce,” he said.
The company founded by Bill Gates declined to release an outlook for the remainder of the fiscal year, citing the “volatility of market conditions going forward.”
“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 chief financial officer Chris Liddell said. “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.”