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Microsoft's First Layoffs

added by Michael on 22 Jan 2009

For the first time since it began in 1975, Microsoft is cutting jobs because of a shrinking economy.

From BreitBart.Com:

Microsoft Corp. said Thursday it is cutting 5,000 jobs over the next 18 months—more than 5 percent of its work force—a sign of how badly even the biggest and richest companies are being stung by the recession.

The layoffs appear to be a first for Microsoft, which was founded in 1975, aside from relatively limited staff cuts the software company made after acquiring companies.

The company announced the cuts as it reported an 11 percent drop in second-quarter profit, which fell short of Wall Street's expectations. Microsoft shares plunged almost 11 percent in midday trading.

"We're certainly in the midst of a once-in-a-lifetime set of economic conditions. The perspective I would bring is not one of recession. Rather, the economy is resetting to lower level of business and consumer spending based largely on the reduced leverage in economy," said Chief Executive Steve Ballmer during a conference call. For consumers, that may mean less discretionary income to spend on a second or third home computer, he said.

The biggest names in the technology sector have been no stranger to layoffs lately. Giants such as chip maker Intel Corp. and even Google Inc. are among the companies that have pulled back on jobs to hunker down in the recession.

Even with $20.7 billion in cash on hand, Microsoft said its business prospects were hurt by the deteriorating global economy and lower revenue from software for PCs. The holiday quarter of 2008 was the worst the PC market had seen since 2002, with computer shipments declining about a half of 1 percent, according to IDC, a technology research group.

Making matters worse, the one type of PC consumers have warmed to in tight times—the low-cost, low-power "netbook"—actually cut further into Microsoft's earnings. The tiny portable computers run on Windows XP, which is older and less profitable for Microsoft than Windows Vista.