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Microsoft joins AMD, Intel in mass layoffs


By David Worthington
January 22, 2009 — 
Microsoft has followed AMD and Intel as the latest industry heavyweight to order mass layoffs as a cost-cutting measure in response to worsening economic conditions.

In its annual report to shareholders, released today, Microsoft disclosed that it would dismiss 5,000 people over the next 18 months. A Microsoft spokesperson stated that the layoffs would begin immediately with 1,400 employees. The rest will gradually take place across the company in finance, human resources, IT, legal and corporate affairs, marketing, R&D, and sales.

Microsoft currently employs approximately 94,600 worldwide, not counting the layoffs that will occur after today's cuts.

"Every division is assessing its portfolio and prioritizing investments based on the best opportunities in the current economic environment," said the spokesperson. "While there are no major products being cut outright, we will consolidate some products and groups where it makes sense."

The cost cuts Microsoft has proposed, including the layoffs as well as cuts in facilities and marketing, could lower its operating expenses by US$1.5 billion, according to a UBS Investment Research report.

Microsoft also announced results for its fiscal second quarter 2009 that fell well below earning guidance. While still profitable, its stock's earnings per share was 47 cents, compared to a guidance of 51 to 53 cents. Revenues fell short by approximately $1 billion.

Much of the decline was experienced in Windows client revenue, a cash cow for the company. That revenue fell 8% "as a result of PC market weakness and a continued shift to lower-priced netbooks,” the company stated in its annual report.

Weak PC sales have also affected chipmakers AMD and Intel. Semiconductor sales fell to $20.8 billion in 2008 from $23.1 billion in 2007, according to a recent report by the Semiconductor Industry Association.

On Jan. 16, AMD announced that it intended to reduce its workforce by nearly 9% and will reduce employee compensation during its first quarter.

Its top executives are taking a hit to their base salaries, and rank-and-file employees will see their incomes drop on a staggered basis depending on their employment status. Other benefits, including the company’s 401(k) matching program, are being suspended indefinitely.

"These actions, while difficult, will allow AMD to better navigate the turbulent economic conditions while protecting our core capability to execute our technology road maps and position AMD for long-term success," said spokesperson Michael Silverman.

In the fourth quarter of 2008, AMD reported a net loss of $1.424 billion, or $2.34 per share. For continuing operations, fourth-quarter 2008 net loss was $1.414 billion, or $2.32 per share, and operating loss was $1.274 billion.

At present, AMD has approximately 15,000 employees. Next month, 3,000 will be transferred to the Foundry Company, a spinoff dedicated to building foundries.

Intel announced yesterday that it would also be consolidating manufacturing operations by closing down some of its older factories. The facilities are located in California and Oregon, as well as in Malaysia and the Philippines. Between 5,000 and 6,000 jobs are being cut, said corporate spokesperson Chuck Mulloy. Intel has around 84,000 employees worldwide. "We are investing in new products and leading-edge manufacturing," Mulloy said, adding that the closures would not affect its transition to a 32nm chip fabrication process. He noted that the older facilities were already scheduled to be "taken out," but that the economic downturn accelerated the company's plans for those closures.

Intel started the year with nearly $14 billion in cash, he said. He added, "We are a capital-intensive business and must keep cash flow positive."


Related Search Term(s): finances, AMD, Intel, Microsoft


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Comments

01/26/2009 02:37:19 PM EST

Are H-1B workers going first? Will they let go American workers and hire more H-1B next year?

United StatesFlip


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