5,000 jobs go at Microsoft as profit falls 11 per cent

Ballmer: We are not immune to the effects of the economy

Microsoft is laying off 5,000 staff worldwide after announcing an 11 per cent drop in second-quarter net income, compared to the same period last year.

Some 1,400 employees will leave the software giant today, with the remainder going over the next 18 months. The cuts come in areas across the company – in research and development, marketing, sales, finance, legal, HR and IT.

The UK will not be among the hardest hit – only two per cent of the firm's 2,900 UK staff are likely to be affected, according to a Microsoft spokesman.

Second-quarter revenue at the company was $16.6bn (£12.1bn), a two per cent year-on-year increase, while net income was $4.17bn (£3bn), down 11 per cent. The supplier expects sales and profit to continue to fall from last year's levels during the second half of its financial year.

Sales of client software fell eight per cent, which Microsoft attributed to "PC market weakness and a continued shift to lower priced netbooks". The results were brighter in server and tools products, which grew 15 per cent.

"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 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. In this environment, we will focus on outperforming our competitors and addressing our cost structure."

Microsoft also declined to offer any predictions on future sales or earnings, due to the "volatility of market conditions going forward".

"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 Microsoft chief executive Steve Ballmer.

"We will continue to manage expenses and invest in long-term opportunities to deliver value to customers and shareholders."