January 22, 2009, 9:58 am
Microsoft FY Q2 Misses; Cutting 5,000 Jobs; Stock Slides
Posted by Eric Savitz
Microsoft (MSFT) this morning provided the Street with some nasty surprises.
Announcing earnings before the opening of trading - rather than after the close, as had been expected - the company posted revenue for the quarter of $16.63 billion and profits of 47 cents, short of the Street at $17.08 billion and 49 cents.
Revenue was up 2% versus the year ago quarter; operating income of $5.94 billion was down 8%, while net income of $4.17 billion was off 11%. The company noted that Client revenue - the Windows business - was down 8% as a result of PC market weakness. The Server and Tools business grew 15%; Entertainment and Devices grew 3%. Online services revenue was flat versus a year ago.
Citing the softening economy, the company said it will cut 1,400 jobs today and up to 5,000 over the next 18 months in R&D, marketing, sales, finance, HR and IT. The reductions will reduce annual operating expenses by about $1.5 billion. The company also is cutting FY 2009 capital spending by $700 million, in part by scaling back expansion plans for its campus in Redmond, Washington.
In a memo to the company’s employees, CEO Steve Ballmer wrote that the company will still fill some new positions, and that net headcount over 18 months will be down 2,000-3,000. Microsoft also will cut its travel budget by 20%, reduce spending on vendors and reduced the marketing budget. The company also will eliminate merit pay increases for FY 10 that would have taken effect in September.
The company also said that due to the volatility of market conditions going forwad, the company “is no longer able to offer quantitative revenue and EPS guidance for the balance of this fiscal year.” The company expects operating expenses for the June year of $27.4 billion.
MSFT this morning is down $1.51, or 7.8%, to $17.87. |
