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Microsoft declines based on netbooks, cuts 5K jobs

updated 10:25 am EST, Thu January 22, 2009

Microsoft Q4 2008 Results

Microsoft today reported quarterly results that included a rare loss in its staple Windows and Office businesses. Although its revenue climbed slightly year-over-year to $16.63 billion this fall, the company's client group revenue dropped 8 percent in the same period along with an 11 percent drop in its net income, which sits at $4.17 billion. The company cites the poor world economy as a factor but specifically blames netbooks for the shortfall as buyers opted for the low-cost PCs, which often carry less expensive Windows XP Home licenses instead of Vista.

The decline in the company's key business is prompting the company to institute its first-ever mass layoffs. Approximately 5,000 workers will lose their jobs in the near future with 1,400 of these jobs being cut effective immediately. Microsoft acknowledges that some of the positions will be in its key research and development fields as well as in marketing, sales and other less essential positions.

CEO Steve Ballmer in an internal memo obtained by All Things D reveals that the move follows already existing cost-cutting of about $600 million and confirms extra steps to try and bring Microsoft's expenses in check with the financial crash. He acknowledges reductions in building expansion as well as reductions in travel costs, marketing, vendors and merit salary increases due later this year. Ballmer explains the rare cutbacks as difficult given the company's roots but also necessary.

"Our people are the foundation of everything we have achieved and we place the highest value on the commitment and hard work that you have dedicated to building this company," he says. "But we believe these job eliminations are crucial to our ability to adjust the company's cost structure so that we have the resources to drive future profitable growth."

Microsoft nonetheless has some positive news for the quarter, such as a 3 percent growth in its Entertainment and Devices group on the back of 6 million Xbox 360 sales for the holidaysas well as a 15 percent boost to its Server & Tools group thanks to annual licensing. The company also has hope for Windows 7 and is unofficially expected by many to release the improved operating system as early as the summer.

No statistics are given specifically for its historically low-performing Zune business or for Windows Mobile, which is usually rolled into the client group.



By Electronista Staff
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Comments

  1. Guest

    Fresh-Faced Recruit

    Joined: Nov 1999

    +3

    yeahhhh

    It has nothing to do with the suck that is Vista. Its the netbooks fault...right.

  1. sgirard

    Fresh-Faced Recruit

    Joined: Aug 2005

    -4

    Vista Tax

    Another example of how raising taxes reduces revenue.

  1. byRyan

    Fresh-Faced Recruit

    Joined: Jun 2007

    +9

    how much

    how much did they pay for that horrible advertising campaign? funny how they don't mention that.

    "sorry we had to cut your job, but we just HAD to get Jerry Seinfeld"

  1. elroth

    Junior Member

    Joined: Jul 2006

    +7

    what?

    I don't believe that $4.17 billion in net revenue is a "loss" - you can call it a revenue decline, but it's not a loss.

  1. testudo

    Forum Regular

    Joined: Aug 2001

    -1

    different views

    Apple claims the netbook market is small and just worth watching at the moment.

    MS, on the other hand, claims it is big enough to warrant letting go 5000 workers.

    And I can't believe no one has commented on the quote
    Microsoft acknowledges that some of the positions will be in its key research and development fields

    with a "What? MS has people in R&D?"

    or even a "Well, I guess once you've copied all the features of Leopard, you don't need them around until OS X.7 comes out..."

  1. chucker

    Fresh-Faced Recruit

    Joined: Mar 2007

    +5

    you would think

    you would think that companies sitting on huge cash piles like MS and with an ability to print money (due to their monopolistic hold on many markets), would think now would be a good idea to dig in their heels, and actually use the worsening economic conditions to pick up cheap talented labour and actually think for the long term and create some really worthwhile products.

    It seems to me that the economy is just an excuse to get rid of underperformers...

  1. gikku

    Fresh-Faced Recruit

    Joined: Jul 2006

    +2

    netbooks

    perhaps the popularity of netbooks is due, at least in part, to being loaded with XP, not Vista.

    Those XP netbooks sales may have saved Microsoft from further falls, not created the fall.

  1. shawnde

    Fresh-Faced Recruit

    Joined: Apr 2008

    +1

    re: netbooks

    Another thing that MS is not willing to admit, is that many of those netbooks are sold with Linux, which typically saves the customer $50. Now wether the customer runs Linux on it, or a bootleg WinXP, remains a mystery !!

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