Microsoft Misses Earnings, First Layoffs Ahead - Page 2

Both Ballmer and Liddell emphasized that Microsoft's most recent quarter did have its share of high points. One was a significant increase in sales of netbooks -- cheap, simplified and downsized notebook PCs meant for simple office tasks, online surfing and e-mail.

The company has had a hit licensing Windows XP to many netbook makers, though with a cost to margins since it brings in less revenue per license than Windows Vista.

"[With] netbooks, we've gone from no [market] share to 80 percent and climbing," Ballmer said.

Yet the success in netbooks hasn't been enough to stave off the need to cut costs. The company's statement said that the majority of the layoffs will come in research and development, marketing, sales, finance, legal, human resources and IT.

"These initiatives will reduce the company’s annual operating expense run rate by approximately $1.5 billion and reduce fiscal year 2009 capital expenditures by $700 million," according to the statement.

Ballmer didn't go into detail on areas in which Microsoft expects to continue investing, saying only that the company is "prioritizing."

The company is also taking other cost-cutting measures, including letting leases lapse on some buildings and holding off on construction of others. The company employs more than 91,000 people, nearly half of them in the Seattle area.

Still, Ballmer and Liddell both underlined the fact that Microsoft is one of a handful of firms actually doing pretty well compared to some other tech giants.

Intel, for instance, reported earlier this month that it was seeing a massive worldwide slowdown in sales that led to a 90 percent drop in income from a year earlier.

"We still grew 2 percent even in the face of the worst economy we've seen," Ballmer said.

At press time, shares of Microsoft were trading 10.17 percent lower, at $17.41.

Update adds comments from Parker and from Microsoft's earnings call.