Microsoft to cut 5,000 jobs after profits slump
Microsoft has confirmed that it will cut 5,000 jobs after posting disappointing profit figures. While no comfort to those laid off, the figure is at least lower than had been rumored.
While a combination of inside sources and common sense had prompted several rumors of job cuts at the end of last year, the only specific prediction had been that Microsoft would make 15,000 employees redundant.
That report had also pegged the layoff announcement as coming last Thursday, placed between the Consumer Electronics Show and Microsoft’s quarterly financial report. In the event Microsoft seems to have opted to get all the bad news out on one day.
Profits dropped 11 per cent year-on-year despite a two per cent rise in revenues. Figures like that would inevitably have prompted investors to demand cost-cutting which may explain the timing of the announcement.
The layoffs are spread across the company, suggesting a general cost-cutting exercise rather than cutting back specific departments or projects. Around 1,400 will lose their jobs immediately, with another 3,600 dropped over the next 18 months. Though Microsoft hasn’t confirmed it, this schedule means they’ll likely try to shed many of those posts through simply not replacing all staff members who leave the company during this time.
This is the first time Microsoft has made widespread job cuts. The layoffs represent just over five per cent of the company’s workforce.
The revenue increase, driven largely by server products, comes despite an eight per cent drop in ‘client revenue’ – in effect, Windows, which still makes up a majority of the company’s business. While Windows’ market share is gradually falling, this drop is being blamed largely on fewer PCs being sold.
In another potentially worrying sign, the company has opted not to make any financial forecasts for the rest of its accounting year (which ends in June). However, Microsoft’s chief financial officer says both revenue and profits will “almost certainly” be down year-on-year.
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