Microsoft will make first mass layoffs in its 34-year history


Published: Friday, January 23, 2009 at 6:01 a.m.
Last Modified: Thursday, January 22, 2009 at 10:36 p.m.

SEATTLE - Microsoft Corp. will make the first mass layoffs in its 34-year history, cutting 5,000 jobs as demand for personal computers falls and even one of the world's richest companies gets burned by the recession.

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

"We're certainly in the midst of a once-in-a-lifetime set of economic conditions," Chief Executive Steve Ballmer said during a conference call. With less access to credit, businesses and consumers are spending less and stretching the lifespan of their existing computers.

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.

Google also reported earnings Thursday and said its quarterly net profit fell 68 percent, its first such drop ever. The results were better than analysts had expected, however.

At Microsoft, the cuts appeared to reflect uncertainty about when times will get better. The company said it could not issue a forecast for earnings and profits for the rest of the year.

The software maker was already facing tough problems, among them its inability to snag a significant share of the lucrative Web search advertising market from leader Google Inc. It tried to fix this by buying Yahoo Inc. and pouring money into its own technology, all the while relying on Office programs such as Word and Excel, and on Windows to keep bringing home huge profits. Now Microsoft's problems seem even harder to fix.

Microsoft, which has $20.7 billion in cash on hand, 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 for the PC market since 2002.

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