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.
