Microsoft to cut 5,000 jobs as profits fall

Layoffs begin today with 1,400 positions eliminated

Microsoft Corp. today said it will cut 5,000 jobs amid falling profits. About 1,400 positions were eliminated today.

The job cuts come as the company announced that fourth-quarter profits fell 11% to $4.17 billion. Revenue rose 2% to $16.6 billion.

The company said it plans to cut jobs in research and development, marketing, sales, finance, legal, human resources and IT over the next 18 months.

Microsoft projected that the cuts will trim its annual operating expense run rate by $1.5 billion and reduce its fiscal 2009 capital expenditures by $700 million.

The layoffs are being implemented because IT spending fell lower than the company's expectations for the quarter. Microsoft said in a statement that it "acted quickly" to reduce its costs.

Microsoft warned that its revenue and earnings for the second half of the year relative to the previous year will be "almost certainly" lower.

The company said it can't provide quantitative revenue and earnings-per-share guidance for the rest of the year because of "the volatility of market conditions."

After the results were announced, Microsoft's share price fell to around $18.05, down $1.31 in early-morning trading.

Software client revenue fell 8%, as PC sales slumped and buyers turned to low-cost netbooks, the company said. Annual software license fees pushed server and software tool revenue up 15%, while entertainment and devices revenue grew 3% on the back of holiday demand for the Xbox game console.

An earnings call with CEO Steve Ballmer is scheduled for 11 a.m. Eastern time.

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