Microsoft to Slash 5000 Jobs

NEW YORK (CNNMoney.com) -- Software maker Microsoft announced Thursday it will cut up to 5,000 jobs in the next year and a half, or 5.5% of its global workforce, citing further deterioration of global economic conditions.

The company also posted lower fiscal second-quarter earnings that missed analysts' forecasts.

Microsoft will slash 1,400 positions immediately, with the rest of the cuts coming by June 2010. The company said it will save about $1.5 billion in operating expenses and $700 million in 2009 capital expenditure.

"Economic activity slowed beyond our expectations in the quarter, and we acted quickly to reduce our cost structure and mitigate its impact," said Chris Liddell, Microsoft's chief financial officer, in a statement. "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."

Shares of the company fell 7% in early trading on the news.

Microsoft (MSFT, Fortune 500) also announced second-quarter net income of $4.17 billion, down 11% from a year earlier. The company reported earnings per share of 47 cents, missing analysts' estimates of 49 cents, according to a consensus compiled by Briefing.com

The Redmond, Wash.-based company reported revenue of $16.63 billion for the quarter, up 2% from $16.37 billion a year earlier.

The company did not offer specific earnings and revenue guidance for the coming quarter "due to the volatility of market conditions going forward." It also suggested that investors should not rely on previous fiscal 2009 estimates.

The software maker said sales of its Vista operating system slumped 8% on weak PC sales as well as a continued shift toward lower-priced laptop computers.

But sales grew in other areas. Revenue from its entertainment and devices division, which includes the Xbox 360, rose 3% over the same period a year earlier. The company also performed well in its server unit, with revenue growing 15% in that sector.

"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 CEO Steve Ballmer in a statement. "We will continue to manage expenses and invest in long-term opportunities to deliver value to customers and shareholders, and we will emerge an even stronger industry leader than we are today."