Microsoft May Cut Deeper into Work Force

Microsoft’s elimination of more than 5,000 jobs has righted the software ship that has floundered under the weight of the economic recession. But, Microsoft executives say that it may not be enough to sustain the health of the software giant if the economy doesn’t improve.

Yesterday, Microsoft executed the layoff of another 3,000 employees as part of a larger reduction in work force announced in January. The total number laid off by Microsoft to date totals somewhere above 4,200 employees, about half in the United States.

The job cuts are distributed across all divisions, Microsoft said. It's unclear what impact--if any--the layoffs will have on Microsoft's massive channel program.

Microsoft executives say they were forced into the company’s first work force reduction because of declining sales that impacted revenue and profits. First quarter sales for Microsoft were $13.65 billion and profits were roughly $3 billion. While impressive numbers, profitability is down roughly one-third of a normal quarter.

Microsoft’s sales and business is being assaulted on multiple fronts. The sluggishness of Windows Vista, the beleaguered and much maligned operating system, is prompting enterprises to wait for Windows 7 to upgrade from the more popular Windows XP. The search business—Windows Live—struggles to compete against Google. And the economic slowdown is driving more businesses and end users to adopt software-as-a-service applications rather than expensive, client-based applications that have made Microsoft rich.

Given the myriad troubles facing the software giant, CEO Steve Ballmer in an e-mail to employees left the door open to more job cuts.

"As we move forward, we will continue to closely monitor the impact of the economic downturn on the company and, if necessary, take further actions on our cost structure including additional job eliminations," Ballmer stated.

Microsoft announced the layoffs in January; they are part of a plan to eliminate more than $1 billion in operating expenses. The layoffs were planned to happen in stages over 18 months, but the company accelerated the job cuts because of the impact on employee morale.

"We are moving quickly to reach this target in response to consistent feedback from our people and business groups that it's important," Ballmer wrote.
The work force reduction is distributed across Microsoft operations, and every division is affected, the company said.

While 5,000 jobs is a significant reduction, it represents only 4 percent of Microsoft’s total work force. Microsoft grew its work force substantially over the last decade, increasing its employee base from 31,000 in 1999 to more than 95,000 today.

According to Securities and Exchange Commission filings, Microsoft will spend more than $525 million to execute the layoffs.

Since October, the technology sector has shed more than 266,000 jobs as blue chip companies such as Microsoft, Google, IBM and Sun Microsystems shrink their work forces.

The following is a list of major job reductions over the last seven months.