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Major Layoffs Coming To Microsoft

| 6 Jan 2009 16:43
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Thousands of Microsoft employees are facing layoffs as the company struggles to maintain profitability in an increasingly grim worldwide economic downturn.

The Independent says that between ten and 17 percent of the company's workforce, representing up to 15,000 jobs worldwide, could be hit by the cuts. The company is being affected by slowing demand at both the retail and business levels, resulting in reduced sales of the Windows operating system as well as licenses for corporate software like Microsoft Office. Profits at the company's MSN business is also under threat as the growth in advertising revenues has "decelerated sharply."

A ten percent reduction in employees could save the company $1.2 billion per year, but Fudzilla claims the cut will actually go as deep as 17 percent, adding that MSN might be "carrying the brunt of the layoffs." Microsoft EMEA (Europe, Middle East and Africa) is also expected to be harder hit by the layoffs than the North American operations, but GamesIndustry predicts that the profitable Entertainment and Devices division will likely emerge from the cuts largely unscathed.

"The prevailing wisdom on Microsoft is that the company may pre-announce disappointing December results," Oppenheimer & Co analyst Brad Reback said. "Should such headcount reductions materialize, we would view them as a positive sign that management is interested in preserving the company's operating margin structure through the downturn."

The news comes in the wake of similar rumors at Sony, which is expected to announce major layoffs of its own early in February. Sony announced large-scale cuts in December but a company rep denied the reports of further restructuring, telling Reuters, "We don't have any such plan." Analysts, however, are saying the company's current plan to save $1.1 billion is inadequate to secure future growth.

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