It’s not the type of party that one usually wants to attend but sometimes you have to make an appearance.
Microsoft today reported disappointing results for its fiscal second quarter. Those results included an anemic 2% revenue growth from the same period a year ago – $900m less than expected.
Facing a deteriorating economic environment, the Redmond-based software company is joining the growing list of technology companies both large and small that have decided to lay employees off.
The company plans to eliminate “5,000 jobs in R&D, marketing, sales, finance, legal, HR, and IT over the
next 18 months, including 1,400 jobs today.“
In a memo to staff, Microsoft CEO Steve Ballmer noted that Microsoft’s ability to grow revenues in such a tough economy was a positive but that “it is also clear that we are not immune to the effects of the economy.“
Microsoft’s cost-cutting measures began in earnest in the second quarter and these were able to reduce operational expenses by $600m. But it isn’t enough. Layoffs alone aren’t enough to realize the type of expense reductions the company believes it needs to achieve. Other things will be cut too:
“To increase efficiency, we’re taking a series of aggressive steps. We’ll cut travel expenditures 20 percent and make significant reductions in spending on vendors and contingent staff. We’ve scaled back Puget Sound campus expansion and reduced marketing budgets. We’ll also reduce costs by eliminating merit increases for FY10 that would have taken effect in September of this calendar year.”
Right now, it’s clear that technology companies are very concerned about the economy and the significant steps many of them are taking to cut costs indicates that executives believe that this downturn is likely to be protracted and painful despite what more optimistic politicians and economists believe.