RealTime IT News

Microsoft Lets the Other (Layoff) Shoe Drop


The same day that Microsoft celebrated the launch of the Windows 7 Release Candidate, the company had less pleasant news for at least a couple thousand employees: They're getting a pink slip.

It's the second round of cuts in a larger move to eliminate 5,000 jobs across the company by the end of June 2010. Microsoft (NASDAQ: MSFT) announced the overall layoffs as well as the first wave of 1,400 cuts on Jan. 22, when it released its earnings for the second fiscal quarter.

The news broke Tuesday morning in an e-mail that CEO Steve Ballmer sent to all employees announcing the second round of layoffs.

"This is difficult news to share. Because our success at Microsoft has always been the direct result of the talent, hard work, and commitment of our people, eliminating positions is hard," Ballmer said. "With this announcement, we are mostly but not all done with the planned 5,000 job eliminations by June 2010."

A Microsoft spokesperson confirmed that the e-mail is authentic but did not disclose the number of layoffs in this round.

"As part of the plan we announced in January to reduce costs and increase efficiencies, today we are eliminating additional positions across several areas of the company," the spokesperson said in an e-mail to InternetNews.com. "While job eliminations are always difficult, we are taking these necessary actions in response to the global economic downturn," the spokesperson continued.

One thing Microsoft officials have not said: whether there will be further rounds of layoffs once the company gets to the magic 5,000 number. However, Ballmer clearly left the door wide open to that possibility.

"We will continue to closely monitor the impact of the economic downturn on the company and if necessary, take further actions on our cost structure including additional job eliminations," Ballmer said in his memo.

Microsoft is also taking other significant cost cutting steps. CFO Chris Liddell told financial analysts in late April, during the company's third-quarter earnings call, that it has lowered costs by an additional billion dollars during the current fiscal year, which ends June 30.

"It shows that Microsoft is really trying to get its cards on the table and the costs off the books," Rob Helm, director of research at Directions on Microsoft, told InternetNews.com.

It's no wonder that the software giant is slashing expenses. Last quarter, Microsoft reported it had brought in $13.65 billion in revenues, a slide of 6 percent from the same period a year ago. Net income came in at $2.98 billion with earnings per share (EPS) of $0.33 -- which represented declines of 32 percent and 30 percent over the prior year, respectively.

Not everyone, obviously, was happy to hear about the latest layoffs, even among some ex-employees. One former senior development manager, who left the company several years ago but still holds stock, was very critical about the latest developments.

"Microsoft has billions in the bank, but for some reason Ballmer feels it is necessary to make a public statement that they, too, are feeling the effects of the economy. Sorry, many of us don't buy your pity-on-me story, Mr. Ballmer," said the former manager, who asked not to be identified.

The stock market's response to Microsoft's announcement appeared to be low key. Microsoft's stock was trading at $19.75, down 2.18 percent, at 2 p.m. Eastern Time.