Microsoft slashing up to 5,000 jobs

Microsoft Corp. said Thursday that it planned to cut thousands of jobs because of the current recession, in a move that underscores the difficulty even some of the most stable U.S. companies are having in dealing with these hard economic times.

The Redmond, Wash.-based software maker announced the job cuts Thursday as it released lower-than-expected quarterly earnings. In a highly unusual step, the company also said conditions were so uncertain that it could not accurately forecast its earnings and revenue for the coming six months.

Microsoft executives could only say that they didn’t expect conditions to improve soon for the company or for the economy.

(MSNBC.com is a Microsoft-NBC Universal joint venture.)

“We’re certainly in the midst of a once-in-a-lifetime set of economic conditions,” Microsoft Chief Executive Steve Ballmer said in a conference call with analysts and journalists. “The economy is resetting to a lower level of business and consumer spending.”

Ballmer said the software maker planned to cut about 5,000 jobs over the next 18 months, including 1,400 immediately. Those cuts effective Thursday will include 872 people in the Puget Sound area where the company is headquartered, spokesman Lou Gellos said.

Still, Ballmer noted that the company also plans to add jobs in areas where executives see the potential for growth, such as Internet search. Microsoft has spent years trying to make itself into a formidable competitor to search engine giant Google, including considering a partnership with or takeover of competitor Yahoo Inc.

In all, Ballmer said the company expects to see its staff shrink by 2,000 to 3,000 people.

Microsoft Chief Financial Officer Chris Liddell also said the company would not dole out pay raises, among other cost-cutting measures. He said it also plans to significantly cut its contractor workforce, although it did not provide a concrete number of those workers it expects to let go. Microsoft employs thousands of workers through various contracting agencies, doing everything from writing code to installing phone lines.

The mass job cuts announced Thursday are highly unusual for Microsoft. The maker of Windows and Office computer software, which was founded in 1975, has tended to hold up well even when the economy is weak and has only had a smattering of small layoffs, usually because of an acquisition or other change.

Up until recently Microsoft had continued to add staff, albeit at a slower pace than before.

“It’s certainly a historical move,” longtime technology analyst Rob Enderle said.

While the job cuts are troubling, Enderle said he was far more concerned with the company’s weak financial results and inability to forecast how it might fare in the coming six months.

“Microsoft is a firm that has historically been able to weather most financial events fairly well,” he said.

But Microsoft has had trouble convincing both businesses and consumers to adopt the latest version of its Windows operating system, Vista. In these hard economic times, Enderle noted that it also may be hard to get people to shell out money for the latest version of its Office software suite, especially when the previous version of the software seems to meet their needs with no added expense.

Even Ballmer noted that if the U.S. economy continues to employ less people, that will translate into decreased demand for Windows, Office and other Microsoft software that workers typically use.

Microsoft’s job cuts marked the latest worrisome news for the technology sector. On Wednesday, semiconductor maker Intel Corp. said it planned to cut up to 6,000 manufacturing jobs as the company struggles with souring personal computer demand that has left its factories operating at less than their full capacity. Even search engine company Google Inc. said in January that it was cutting a substantial number of its temporary workers.

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