Software giant Microsoft  said Thursday it will cut 800 positions worldwide. The latest round is part of Microsoft's previously announced move to eliminate 5,000 jobs or five percent of its workforce.
Microsoft has been eliminating jobs for nearly two years to reach a healthier operating position and save $1.5 billion a year. The Redmond, Wash.-based business needs to make the job cuts because of decreased sales, specifically in enterprise IT. Microsoft announced it would begin the major cuts in January after reporting a $465 million shortfall in OEM revenue, according to the company's financial reports.
"Earlier this year, we announced that in order to reduce costs, increase efficiency , and prioritize our focus areas, we would eliminate approximately 5,000 positions by June 2010," said Microsoft spokesperson Lou Gellos in an e-mail. "Today, we are eliminating around 800 positions spread across multiple businesses and locations and have completed our reduction plan sooner than we had anticipated 11 months ago."
More Cuts Possible
In May, Microsoft CEO Steve Ballmer said the company was close to achieving the 5,000 cuts. The most recent head count taken on Oct. 23 shows 91,005 employees worldwide, down 1,758 from the reported 92,763 it had just four months ago and the 95,000 it had in January.
While Microsoft is still hiring in specific areas of the company, it may have to reduce the number of employees again, the spokesperson told us.
"At the same time we continue to hire in priority areas, but also understand that continuing to manage our businesses closely, as we always do, can mean additional head-count adjustments," Gellos said.
Analysts say the move makes sense. "I think the past year has been difficult for technology companies of any size," said Charles King, principal analyst with Pund-IT. "Even for a company that has long been profitable and successful like Microsoft, when the crunch comes you cannot keep pouring money down the drain until your sales are up again."
"Bottom line, the company is looking at preserving capital and reducing expenses wherever possible," he added.
Windows 7 Not a Factor
The cuts come just weeks after Microsoft's release of its new operating system, Windows 7. Analysts say the move doesn't mean the new operating system is doing poorly; in fact, it's the opposite. Microsoft wants to boost sales of its operating system while keeping operating costs down.
"Although the company did not offer any guidance on which business units would be affected, they did state cuts were coming across a number of global offices," King said. "It would be hard to see a smoking gun linking this and the Windows 7 launch because the Windows 7 launch went off without a hitch and uptick of the product has been very positive."
King said he doesn't see any more cuts, at least in the short term. "Mr. Ballmer said they finished cuts ahead of schedule. Seldom do you see an executive make that comment and draw the line in the sand," King said. "If 2010 is positive and we start to see a sizable number of sales, it would not surprise me to see Microsoft adding positions again."
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