Microsoft cutting 5,000 jobs on weak results
Microsoft said Thursday its sales and earnings for the December quarter fell well below expectations and announced a series of cost-cutting moves, including its first-ever companywide layoffs.
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The software maker said it will cut up to 5,000 jobs, or 5 percent of its workforce, over the next 18 months. About 1,400 jobs were eliminated immediately. The software maker is also paring other expenses, such as delaying salary increases and cutting back on vendors and contractors.
Amid slow PC sales, revenue for the quarter came in at $16.63 billion for its fiscal second quarter that ended December 31, up just 2 percent from a year ago and roughly $900 million less than the company previously projected. Per-share earnings came in at 47 cents, also below forecasts.
Sales in the Windows unit were down 8 percent, amid not only a drop in PC unit sales but also a shift to lower-price Netbooks, for which Microsoft receives less money. The drop in Windows sales was partially offset by strength in the company's server and Xbox divisions.
"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," Chief Financial Officer Chris Liddell said in a statement. "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."
In its press release, the company said that "due to the volatility of market conditions, going forward, Microsoft is no longer able to offer quantitative revenue and (earnings per share) guidance for the balance of this fiscal year." It said it expects its operating expenses to be about $27.4 billion for its full year ending June 30.
The layoffs are the first across-the-board reductions in Microsoft's ranks in its history, though it has cut jobs in certain areas or locations in the past. Although Microsoft plans to cut 5,000 jobs in total, its overall workforce is not expected to drop that much, as it continues to hire--albeit at a lower rate--in key areas. Overall, CEO Steve Ballmer said in an email to workers that the total workforce will probably drop by 2,000 to 3,000 jobs.
Jobs eliminated include positions in product research and development, sales, HR, legal, finance, information technology and other areas.
Rumors of the cuts had been growing over the past month or so, with some reports suggesting the company could slash more than 15 percent of its workforce and others holding out hope the company could trim costs without laying off full time workers. Fears heightened on Wednesday when workers found themselves unable to access the company's internal, online organizational chart.
The cost-cutting moves, which also include delaying raises and further cuts to its vendor and contractor ranks, should cut its annual operating expenses by $1.5 billion and reduce fiscal-year 2009 capital expenditures by $700 million, Microsoft said.
The software maker had been scheduled to report earnings after the market closed Thursday. The company moved up its analyst conference call as well, which CNET News covered live here.
During her years at CNET News, Ina Fried has changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley. These days, most of her attention is focused on Microsoft. E-mail Ina. 
While I can't fully ascribe it to the faltering that I've been predicting for a long time now, it is indisputable that while Apple, IBM, and the big Linux players are holding up very well even in this economy, The Beast has stumbled. MSFT is still turning somewhat of a profit, as are most tech sector corps, but it is no longer enough to sustain its plans for expansion and attempts at maintaining its domination. I seriously take no pleasure in saying it, but it had to be said... MSFT is beginning to fail, and this is where its peak begins to drop.
@ "smilin :)" - you owe Ms. Fried an apology, eh? (though as an admitted MSFT employee, you're prolly a bit busy right now trying to find out if you're on that list or not).
Ah well - let's see how the MSFT crowd spins this one...
/P
As for stumbling, you surely have a short memory. This company as a very long history of getting it right on the second and third tries. Vista was a significant redesign under the hood as well as the UI, hence some initial issues that have for the most part been cleared up. Windows 7 has been getting very strong reviews so I hardly see that as a sign of failing. Penquinisto, you tarnish your ability to influence anyones thinking when you consistently speak of things that anyone who follows tech issues over the years knows is a fallacy. If you ever expect to have any credibility, you must set aside your petty indifferences and speak to the truth rather than your own personal biases.
LOL
Mind you I agree - it seems MS must move with the times and restructure. Perhaps this is no bad thing and the wake up call MS needs.
He is correct, but does not say why. This might explain why, from the article where Ina Fried writes: "Sales in the Windows unit were down 8 percent". CNN names Vista in particular.
Vista sucked, its the new ME
Windows 7 is awesome, it is the new XP
if you wish to argue with me about Win7, try the Beta, I love Linux and have tried the Mac, now MS haters, try Windows7 before you hate it.
"I seriously take no pleasure in saying it"
followed by:
"... as an admitted MSFT employee, you're prolly a bit busy right now trying to find out if you're on that list or not"
and
"Ah well - let's see how the MSFT crowd spins this one..."
Have some common human decency dude..
You are right - it is pretty harsh to kick someone when they're down.
That said, I do wonder if any of the really fervent MSFT cheerleaders in the CNET talkbacks are among those who get the axe. If so, what has changed in their opinion of the products they hotly defended (and in some cases, spread a thick layer of FUD in defense of). If not, what saved them?
But yeah - Random_Walk nailed it - Vista sucked hind teat, enough to drag the Windows division downwards. Forrester (or Gartner? I forget) mentioned this today as well.
Rationalize it all you want, but I know for fact that it wasn't any of the Windows server products that killed things - those have longer cycles. It wasn't MCE, since that's too niche of a market. Someone in here mentioned netbooks, but that doesn't explain it either, since Apple (which doesn't make netbooks) GREW by 22 frickin' percent YoY - the majority of their Mac sales were (drum roll please...) notebooks.
/P
It would be worse if you had to sit around for two weeks wondering if you were on the list or not.
Apple once had this problem before Steve Jobs came back to fix things. The first thing Jobs did was kill the Newton, Apple printers, Apple scanners, and improve the quality of the Macintosh line. The lower costing iMac was invented, maybe Microsoft needs to invent a lower costing Windows with just the core OS minus bloated features maybe base it on Windows XP and call it Windows Lite 1.0 or Windows Legacy Edition and sell it for $70 or $50 a CD. That will help fight piracy, plus give people who don't like Vista an option to use a different OS and still run legacy Windows programs.
The Zune is a pale imitation of the iPod. The XBox 360 is a pale imitation of the Playstation 3. Either get rid of them, or spin them off to a different company by selling the tech or making a new company and split it off from the main Microsoft. Call it ZuneX or Zunebox or Zunesoft or something. That should keep the DOJ happy if Microsoft spins off Turkey products into smaller companies and away from the main company and make them independent.
Support a third party OS like AROS, HaikuOS, or even Linux and develop Microsoft applications for that platform. Open Source software operating system need the applications as well as Windows. Remember that Wordperfect's success was that it was ported to as many different operating systems as possible. But don't port MS-Office 2007, port MS-Office 2000 or XP as MS-Office Alternative and put in import export options for MS-Office 2007 DOCX MSOpenXML formats. That way Microsoft can promote the new format on different operating systems. being Anti-Linux is stupid and will cost Microsoft in the long run, supporting alternative operating systems will win Microsoft some good will and silence some critics.
Did you even read this article? Or any article about the video games industry over the past year? Here's a quote from the article you are unsuccessfully commenting on:
"The drop in Windows sales was partially offset by strength in the company's server and Xbox divisions."
Now read some other articles. Xbox 360 console and game sales have been tremendous, easily surpassing those of the Playstation 3.
Another gem from you - "supporting alternative operating systems will win Microsoft some good will and silence some critics."
Microsoft wisely chose to support the right alternative operating system, Mac OS. Linux support would be a waste. Why do consumers like Linux? Because they don't have to pay for it, which means they won't be paying for Microsoft software.
I agree with you about the Zune, Microsoft needs to ditch that product.
Xbox has been a financial liability for years.
If they are making a profit now, it is only paying off a debt and will be for some time to come.
I remember a 1 billion hit they had a while back because they had to support product faults longer than expected.
Xbox is a shoddy product.
Zune? just ditch it MS
Sony is losing at least $50 per PS3 sold. Get a grip on your anti-Microsoft stance.
Xbox is a pile of crap.
If you want to argue that sales means anything, then let's discuss that the Jonas Brothers must be the most talented "singers" around.
was AMD Phenom cutting edge tech? yes it had 4 cores on one die, was it a piece of overpriced crap? yes
Phenom II, nothing cutting edge about it, DDR3 has been around forever, 4 cores on a die isn't new, but is it worth my money, yes.
Bluray is crap until it drops in price (when the first $99 player comes out is cheap enough), it is cutting edge tech.
Hmm, guess the economy differs for Apple and IBM?
Hmm, guess if Vista had been superb, they still would be doing this?
Hmm, the fact this blindsided them to rush out releases to Wall Street?
Please don't enter me into the Apple/MSFT debate comments. That's not my point. And I get that MSFT is populated by humans, fallible as us all. I just thought some: "We've done excellent work and had to make our corrections too, and this is one of them. We want to build on successes and trim some of our less successful efforts" might have been appropriate. They certainly deserve credit for say all their server products; conversely, Vista or Zune have been less than home runs.
Actually given the sectors they serve it does.
Ars Technica:
The usual ugly duckling of Microsoft's divisions, Entertainment and Devices, did see a growth in revenue of three percent, which the company ascribes to booming sales of the Xbox 360?it moved 6 million of the consoles this past quarter. Unfortunately, in the previous quarter, a rise in revenue in this division was accompanied by an increased loss. The earnings statement didn't comment on whether that was the case this time around, but it's likely that the issue will come up in the earnings call.
http://money.cnn.com/2009/01/22/technology/microsoft_jobs/index.htm?postversion=2009012209
Ina Fried Quote: "Sales in the Windows unit were down 8 percent".
Come on Ina.. afraid to use the "V" word on c|net...? ;-)
Face it, Gates is gone and Microsoft is just another corporation managed by self serving executives who will run the company to meet short term goals which maximize executive compensation.
Seriously - when your competition is growing at still-explosive levels, and you're barely eking out 2% with little promise of improvement for at least a year (and even then maybe, if Windows 7 actually does something)?
Microsoft is hitting a big rut in the road and is bouncing off some deadwood. This is a good thing.
All the acrimony over something stupid like gaming platforms should be taken somewhere else as all consoles are useless to a society as a whole. Microsoft windows is a useful program insofar as it does what it is supposed to do, business applications, web surfing, and some entertainment uses. The Mac software does this but on a simpler level. Such is life.
What I really don't like are bullyboy tactics employed by some of the posters here who think that hiding behind a pseudonym gives them the right to personally attack people like Ina and other posters who post their opinions in any forum, showing low class breeding and a mule headed stubbornness even when beaten over the head with facts!
Now, beating at people who use Linux shows even lower class ethics, we are a "FREEWARE" community helping to support all the people who cannot afford to use Big Bills OS or Mr. Jobs hardware / software combination's, I myself use a combination of software OS's depending on what I need to do at the time. Such is life.
Microsoft has truly grown to an unprecedented gargantuan size and any stumble can cause it to hemorrhage assets like a waterfall if successful surgery is not done quickly and the wounds properly cauterized. Xbox, Zune, and any other dependent needs to be cut loose to either sink or swim under it's own power away from the parent company's embrace. Thus is life.
Vista has been a technicians nightmare ever since it's opening day, and Microsoft is trying to bury their mistake by coming out with Windows 7, my tests of the new os have been inconclusive to the extreme.
It seems quicker than Vista and will run properly on substandard hardware, but is not really much more than a flashier Vista. The firewall seems to be much weaker, while the bells and whistles are much gaudier and harder to turn off (I don't need pretty, I need functionality). Various benchmarking tests revealed slight increases in video benchmarks while cpu benchmarks seem to run in the lower range even after substantial tweaking, this compared between Xp pro and Windows 7. The real bad thing was the crash that took out the hard drive that Windows 7 resided on.....Boom, no use until a reformat was done.
On this crappy hardware it has run as well as XP ever did.
It would almost be sad to see vegehead, seaspray, future boy and the rest of the MS parrots no longer get paid for posting nonsense.
Almost.
Yes they sold many units, millions as matter of fact, but to a very gullible group of computer makers who tried to shove their Vista PC's down our throats. I actually sold 700mhz to 1.5Ghz used computers with XP and along with trade ins of Vista computers. I am NOT kidding, people just don't want them. I admit I use a vista computer at home, but that does not meen I like it.
I also hear through the rumer mill that Windows 7 is not going to measure up either, and that will equal more layoffs. Its a wonder that so many large corporations INSIST ON BEING STUPID!
Sales in other divisions were pretty good and as expected. if you take half of the Netbook sales and make them Vista (which is terrible on Nebooks) or if make them Notebook sales which have regular price for the OS then the financial report looks a lot different.
The point i am making is don't think people are not buying MS products right now. They are just buying cheaper versions of the OS which has affected sales numbers.
If this were true then why are Windows sales down by 8%? Netbooks did not take enough of the market to easily account for the difference.
http://arstechnica.com/news.ars/post/20081221-netbook-sales-surge-in-economic-downturn-wheres-apple.html
Now consider MS makes probably 1/4 the price on these netbooks as it would Vista.
BWAHAHAHA!!!
Take a clue M$, ditch Monkey Boy already!
- by OFC_Rocco January 22, 2009 11:59 AM PST
- Still, gamer consoles are as a rule, useless.
- Like this Reply to this comment
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(46 Comments)If microsoft thinks they will float they should kick them loose and see, I would bet they sink in a year or two.