Thursday, January 22, 2009

Microsoft cutting 5,000 jobs...

As I’ve been saying all along, the Puget Sound area tends to lag the rest of the nation by about 18 months. Our cycle was always tied to the fortunes of Boeing, who in turn was tied to the airlines, who were tied to the broader economy – thus the lag. Now we have a more diverse economy with all the high tech companies in the area, especially MSFT.

A year ago people in this area couldn’t believe that housing prices could decline HERE. That, too, lags the rest of the nation here. Now the effects are beginning to be felt. It was just January 9th that Boeing announced they were laying off 4,000 jobs. Sadly, I fear that it’s just the beginning:
Microsoft cutting 5,000 jobs

Puget Sound Business Journal (Seattle)

Microsoft Corp. said Thursday morning it will cut 5,000 jobs over the next 18 months, including 1,400 today, and announced earnings well below previous estimates.

It is the biggest layoff in the company's history. The job cuts will range across the company's research and development, marketing, sales, finance, legal, human resources and information-technology departments.

The job cuts, which had been rumored in recent days, vastly exceed the sporadic layoffs Microsoft has made over years, usually a few hundred employees.

Chris Liddell, Microsoft's chief financial officer, said slow sales of software and PCs had forced the company to cut expenses, and he took the unusual step of not offering revenue or profit estimates for the remainder of the fiscal year, which ends June 30, 2009.

“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,” Liddell said in a press release.

“We are not immune to the effects of the economy,” said Microsoft CEO Steve Ballmer, in a statement.

For the second quarter, Microsoft said revenue rose to $16.6 billion from $16.4 billion in 2007. Net income fell to $4.2 billion, or 47 cents per share, from $4.7 billion, or 50 cents per share a year earlier.

Analysts polled by Thomson Financial Network expected second-quarter revenue of $17.1 billion and earnings of 49 cents per share.

Citing the “volatility of market conditions,” Microsoft said it won’t provide revenue and earnings guidance for the rest of the fiscal year.