Microsoft has given pink slips to 1,400 employees today with another 3,600 set to handed next month.
The news came during a surprise earnings announcement during which the company reported revenue of $16.6 billion for its second quarter, ended Dec. 31, up 2 percent from last year. Net income was $4.2 billion, down from the $4.7 billion posted during the same period last year.
The cuts will come from the company’s R&D, marketing, finance, legal, human resources and IT staffs.
“Economic activity and IT spend slowed beyond our expectations in the quarter,” said Chris Liddell, Microsoft’s chief financial officer. “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.”
Microsoft added it was “no longer able” to give a profit and revenue outlook for the fiscal year amid current volatile market conditions.
Shares in Microsoft fell 7.9% following the announcment. “While we’re 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 chief executive Steve Ballmer.
The BBC reports that Richard Williams, an analyst at Cross Research, said: “Microsoft has never had a layoff like this in my knowledge, and it’s sending a signal that the times are definitely changing.”
Microsoft said the announced job cuts would take place in research and development, marketing, sales, finance, legal, human resources and information technology.
It added it would also be making other cost-cutting measures, including a reduction in spending on travel.
“These initiatives will reduce the company’s annual operating expense run rate by approximately $1.5bn and reduce fiscal year 2009 capital expenditures by $700m,” Microsoft said.