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Microsoft to slash jobs, posts quarterly profit drop

January 22, 2009 |  7:30 am

Microsoft CEO Steve Ballmer

Microsoft said today it would cut up to 5.5% of its jobs, the first mass layoff in the 33-year-old tech giant's history.

The world's largest software maker plans to let go 5,000 of its nearly 90,000 employees, including 1,400 today, "in light of the further deterioration of global economic conditions."

Microsoft's quarterly revenue and profit also fell short of its previous forecasts and Wall Street's expectations. For its fiscal second quarter, the Redmond, Wash., company posted revenue growth of only 2%, to $16.63 billion, and an 11% drop in net income, to $4.17 billion. It blamed weak demand for personal computers that run its Windows operating system and Office software.

Its shares are trading down more than 8% this morning. Microsoft had been scheduled to announce its quarterly results after the stock markets closed but got a jump on it amid heavy speculation about job cuts. Chief Executive Steve Ballmer said:

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. We will continue to manage expenses and invest in long-term opportunities to deliver value to customers and shareholders, and we will emerge an even stronger industry leader than we are today.

The tech sector, like many industries, is getting nailed by the recession. Corporations are cutting back on their information-technology budgets, and consumers ...

... are putting off purchases of computers, cellphones and other tech gear.

Overnight, Sony announced that it would swing to a $1.7-billion annual loss, its first in 14 years and only the second in its history, after originally forecasting a $1.5-billion profit. The Japanese electronics giant is expected to cut more jobs on top of the 8,000 reductions it announced last month. In another first, EBay reported its first drop in quarterly revenue Wednesday.

This sortable list on the Wall Street Journal's Real Time Economics blog shows the depth of job cuts by tech companies in the first three weeks of 2009: Intel is cutting 6,000 jobs, or 7%; Bose 1,000, or 10%; Advanced Micro Devices 1,100, or 9%; Autodesk 750, or 10%; Motorola 4,000, or 6%; Seagate Technology 800, or 10%; Lenovo Group 2,500, or 11%; EMC 2,400, or 7%; and Logitech International 500, or 5%.

Corrected, 3:25 p.m.: An earlier version of this post erred in stating that Sony's estimated $1.7-billion loss was for the quarter. In fact, that figure refers to the full-year loss.

-- Chris Gaither

Photo: Microsoft CEO Steve Ballmer at the Consumer Electronics Show. Credit: Robyn Beck / AFP/Getty Images