Microsoft on Tuesday began notifying workers who won't make it through the second wave of layoffs. CEO Steve Ballmer announced the job cuts in a staff e-mail as part of the 5,000 job reductions announced in January.
The layoffs mark the first notable employment hiccup at Microsoft in its 34-year history and come in response to an economic downturn that has impacted the software giant's operations.
"As we move forward, we will continue to closely monitor the impact of the economic downturn on the company and, if necessary, take further actions on our cost structure, including additional job eliminations," Ballmer said in his e-mail to employees.
Rehiring Terminated Employees
A Microsoft spokesperson told Dow Jones that the company is eliminating positions across several areas, but didn't indicate which areas or how many jobs. Microsoft plans to cut about five percent of its 96,000 employees by June 2010 to save $1.5 billion a year.
Microsoft cut 1,400 jobs in January. Ballmer noted in his e-mail that Microsoft will be nearly done with layoffs after this round. That would indicate that thousands are about to receive pink slips. Microsoft said the second wave of layoffs will be spread across U.S. and international markets. The first wave was mostly concentrated in the U.S.
Microsoft is providing laid-off employees with severance packages of an undisclosed amount. In a bright spot, Microsoft said some of the terminated workers may be rehired as part of the 2,000 to 3,000 new jobs the company expects to create between now and June 2010.
'A Minor Adjustment'
Microsoft isn't alone in its layoffs. Tech companies have witnessed employment bloodbaths in the past two quarters. The outlook remains cloudy about a full economic recovery that would allow IT firms to begin delivering measurable, predictable sales and revenues.
"Much of what happens with Microsoft and other IT firms depends on what happens with the larger economy. If things remain in the tank, then additional job cuts could possibly be coming," said Charles King, principal analyst at Pund-IT. "Even a company like Microsoft that has the deep pockets can't fail to meet revenue goals quarter after quarter and continue to run the company as if everything is fine."
King said some divisions of Microsoft may grow while others lag through the recession, much the same as Apple has experienced with explosive iPhone sales while seeing simultaneous contraction in its Mac business. The uneven performance makes it difficult to predict what's coming in the second half of the year. Microsoft is hoping Windows 7 will energize its software revenues, which may also bode well for its PC-vendor partners.
"Microsoft should be applauded for the fact that these cuts are not draconian. Cutting 5,000 employees over an 18-month period is a relatively small number, especially when you look at what vendors like Sun Microsystems have seen over the past couple of years and what is likely to happen after Oracle finishes its acquisition this summer," King said. "That's going to be a bloodbath, in all likelihood. What Microsoft is doing is, while painful to the people involved, a minor adjustment by comparison."