Report: Microsoft to rein in real estate expansion

Widely rumored layoffs still uncertain

Microsoft Corp. is expected to announce cost-cutting measures when it reports its second-quarter earnings on Thursday. The steps it could take include cutting back on previously announced real estate expansion plans, according to a news report.

Microsoft will delay for at least three years the construction of all new buildings in Redmond, Wash., except one, the Seattle Post-Intelligencer reported Monday. The story was based on an internal Microsoft PowerPoint presentation obtained by the newspaper.

Redmond is the Seattle suburb where Microsoft's headquarters are located. Microsoft will also not renew most of its leases when they come up for renewal this year and next, the newspaper reported. The real estate measures would help Microsoft save $607 million through the end of its 2010 fiscal year, according to the Post-Intelligencer.

In a statement, Microsoft spokesman Lou Gellos confirmed that "as some leases expire, we will not renew them." Gellos said some nonrenewals of leases were part of Microsoft's plan "all along," but he confirmed that the construction slowdowns were "in light of the economic situation."

The likelihood of broad layoffs at Microsoft, which some reports have said could be announced late this week, remains "unclear," reported the Post-Intelligencer.

Microsoft employs 94,000 people worldwide, including 40,000 in the Seattle area. Last year, Microsoft's head count grew by 16%.

The PowerPoint presentation, developed by Microsoft's real estate and facilities team, includes the assumption that the company's workforce will not grow in the next two and a half years but will start growing by 3% a year after that, the Post-Intelligencer said.

The number of layoffs that may be announced this week has been reported to be as high as 15,000, or 16% of Microsoft's workforce, although many analysts expect far fewer. If there is a layoff, it would be Microsoft's first broad layoff, though the company has had at least eight small ones in the last seven years, totaling almost 1,100 employees.

Despite the real estate cutbacks, Microsoft plans to keep employee perks such as free beverages and the Redmond campus van shuttle, the newspaper reported.

Copyright © 2009 IDG Communications, Inc.

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