US software giant Microsoft is to cut up to 5,000 jobs over the next 18 months - including 1,400 immediately - due to a slowing economy and weak spending on technology.
Microsoft employs 1,200 people at Sandyford in Dublin, but a spokesperson said the cuts would have only 'a very minor impact' in Ireland. It is believed fewer than 20 jobs will go.
Microsoft said net profit fell by 11% in the second quarter of its financial year compared with a year earlier to $4.17 billion. Revenue was $16.63 billion, 2% more than the same period a year ago.
The world's biggest software firm said that 'in light of the further deterioration of global economic conditions', it was eliminating up to 5,000 jobs. The cuts will be in research and development, marketing, sales, finance, legal, human resources and IT over the next 18 months.
Microsoft employs some 91,000 people and the job cuts announced today amount to a reduction of about 5.5%of its global workforce. Rumours of job cuts at the firm had been circulating for weeks.
Microsoft is cutting 5,000 jobs over the next 18 months, nearly 5% of its workforce, following a deterioration in the PC market.
The layoffs are thought to include 60 jobs from the firm's UK workforce of 2,900 in London, Reading, Manchester, Edinburgh, Cambridge, and Chertsey in Surrey. Around the world, Microsoft employs 95,000 people and today's announcement represents a 5% cut.
Announcing the redundancies, Microsoft said it had been hurt by worsening global economic conditions and lower revenue from software for PCs as well as the growing popularity of low-cost netbook computers. The final quarter of 2008 was the worst for the PC market in several years.
The company, founded in 1975, announced the cuts as it reported an 11% drop in second-quarter profits, which fell short of Wall Street's expectations. Microsoft shares lost 7% of their value in pre-market trading.
The jobs will be lost in research and development, marketing, sales, finance, legal, human resources and information technology over the next 18 months. 1,400 jobs will be cut on Thursday. The company will reduce travel spending by a fifth, eliminate merit salary rises in September, and scale back the expansion of its Puget Sound campus near Seattle, Washington.
"Economic activity and IT spend slowed beyond our expectations in the quarter, and we acted quickly to reduce our cost structure and mitigate its impact," said Microsoft's chief financial officer, Chris Liddell. "We are planning for economic uncertainty to continue through the remainder of the fiscal year, almost certainly leading to lower revenue and earnings for the second half relative to the previous year."
The cuts appear to be a first for Microsoft, aside from relatively limited staff cuts it has made after acquiring other firms.
The company said profits slipped to $4.17bn (£3bn), or 47c a share, from earnings of $4.71bn last year, or 50 c a share. Total revenue edged up 2% to $16.63bn, as sales of software for corporate computer servers helped offset an 8% drop in revenue for PC software.
The results missed Wall Street's forecast for earnings of 49c a share on sales of $17.08bn.
Microsoft said the job cuts would reduce operating costs by $1.5bn as it prepares for lower revenue and earnings in the second half of the year.
"While we are not immune to the effects of the economy, I am confident in the strength of our product portfolio and soundness of our approach," said Steve Ballmer, the Microsoft CEO, in a statement.
Microsoft redundancies will include UK jobs
Kat Baker
Wednesday 06 May 2009 10:52
Microsoft has confirmed up to 150 UK jobs will be among the 5,000 positions lost globally as the software giant reduces its workforce by 5%.
A spokesman for Microsoft told Personnel Today it was too early to say which areas of the UK workforce would be affected, but he could not rule out cuts in back-office functions, including HR.
The redundancies – the first in the company's 34-year history – will reduce its 2,880-strong UK workforce by 5%, and will take effect by June 2010.
The Microsoft UK spokesman said: "As part of the plan we announced in January to reduce costs and increase efficiencies, today Microsoft is commencing consultation to remove additional positions across several areas of the company. A number of UK positions are affected, representing about 5% of the 2,880 people currently based in the UK.
"We are working closely with affected employees to help them through this difficult transition. While job reductions are always difficult, we need to rebalance resources against our priorities in the current climate, and we will continue to evaluate our business to ensure that our investments are aligned to current and future revenue opportunities."
In January, Microsoft announced 5,000 jobs would be lost as the company announced poor results during the downturn
Microsoft U-turn over redundancy pay gaffe
Software titan reverses position after overpaying some staff during recent layoffs * Share0 * * * inShare0 * -------------------------------------------------
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Bobbie Johnson, technology correspondent * ------------------------------------------------- theguardian.com, Tuesday 24 February 2009 02.20 GMT
Technology giant Microsoft has been forced to make an embarrassing climb-down after it asked some former employees to return part of theirredundancy payments.
In what the company has described as an "administrative error", a handful of workers were given around $5,000 (£3,450) more than the severance pay they were entitled to after being made redundant last month.
Despite the fact that the company initially requested that they return the extra cash, however, it has now said they can keep the money after a storm of protest online.
In a statement, Microsoft said that it had mishandled the affair and would no longer be chasing repayment.
"Last week, 25 former Microsoft employees were informed that they were overpaid as a part of their severance payments from the company," it said.
"This was a mistake on our part. We should have handled this situation in a more thoughtful manner. We are reaching out to those impacted to relay that we will not seek any payment from those individuals."
The gaffe came after 1,400 workers were given their marching orders in January – the first major job cuts in Microsoft's long history, and part of the software titan's plan to reduce its staffing levels by 5,000 posts next year. Most employees affected were given a 12-week severance package as part of the deal.
However, news that the company was asking for the excess cash to be returned spread across the internet last weekend, after one letter demanding repayment was published online.
According to those documents, the letters claimed that an "inadvertent administrative error occurred that resulted in an overpayment," and asked for repayment to be made within 14 days.
Response to the news was varied, but some criticised Microsoft for being hard-hearted during a time of financial hardship for those affected.
"Are you kidding me?" wrote one commenter on the blog Techcrunch, where the news first erupted. "Screw you… what goes around comes around."
One Seattle employment lawyer even suggested that Microsoft might not have been legally able to demand the money back if the error was not immediately obvious to laid-off workers.
"It may depend on whether or not it was obvious that there was an error," Jill Pugh told ComputerWorld. "A lot of the people laid off were salaried employees, who often don't know exactly what they make in a week minus taxes."
In the end, though, Microsoft executives decided that swallowing the $125,000 slip-up would be easier than suffering from bad public relations.
"I don't think it's worthy of us asking them to make that payment back to us," Microsoft senior vice president Lisa Brummell told the Seattle Post-Intelligencer.
Microsoft Reports Second-Quarter Results: Redundancies Take Place
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Microsoft posted their second quarter results today. Desktop software sales were down 8%. Server licensing was up 15%. Games (X-Box) is doing well, as was reported in Irish media, bucking the general trend. Due to market instability, MS is not providing guidance on performance for the rest of their fiscal year.
Some 5000 redundancies were also announced. This is much less than the numbers that had been rumoured before. 20 out of 1200 are rumoured to be affected in Microsoft Ireland.
"In light of the further deterioration of global economic conditions, Microsoft announced additional steps to manage costs, including the reduction of headcount-related expenses, vendors and contingent staff, facilities, capital expenditures and marketing. As part of this plan, Microsoft will eliminate up to 5,000 jobs in R&D, marketing, sales, finance, legal, HR, and IT over the next 18 months, including 1,400 jobs today. 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".
