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Microsoft expected to announce job cuts

Posted: 22 Jan 2009     Print Version  Bookmark and Share

Keywords:technology industry  software maker  job cuts  Windows 

Leading software maker Microsoft Corp. is expected to post a quarterly profit that misses its own target and announce thousands of job cuts this week as the economic climate hurts even the technology industry's biggest players.

When Microsoft reports fiscal second quarter results, investors are likely to press for comments on its outlook and on Yahoo Inc., whose search business has been the object of Microsoft's desires.

The report comes against a backdrop of a wounded global economy that has stifled demand for everything from personal computers to business software and video games, all markets in which Microsoft is a significant player.

"All eyes are on the forecast," said Jefferies & Co. analyst Katherine Egbert. "Expectations for the guidance are pretty low."

Analysts on average put Microsoft's profit at 49 cents a share for the quarter ended Dec. 31, which includes a U.S. holiday shopping season that has been called the worst in at least four decades. The Redmond, Wash.-based company had forecast a per-share profit of 51 cents to 53 cents for the quarter.

Wall Street is looking for quarterly revenue of Rs.85,562.23 crore ($17.1 billion), according to Reuters Estimates, also short of Microsoft's own target of Rs.86,562.95 crore to Rs.89,064.77 crore ($17.3 billion to $17.8 billion).

Egbert says she expects Microsoft to report sales of its Windows software for PCs and laptops to drop 3 per cent from a year earlier, making it the toughest quarter in eight years. She blames the shortfall on weak consumer sales, noting that businesses have yet to cut back as much as retail shoppers.

Wall Street's expectations for Microsoft's performance for its fiscal year ending in June 2009 have declined since it last reported results three months ago.

Analyst forecasts for full-year net income have dropped 10 per cent to Rs.88,914.67 crore ($17.77 billion), while revenue projections are down 4.4 per cent at Rs.318,631.73 crore ($63.68 billion), according to Reuters Estimates.

Job cuts

With an eye on reducing costs, Microsoft is widely expected to announce that it will cut jobs, following similar moves by other tech firms, including AT&T Inc., Dell Inc., Motorola Inc. and Advance Micro Devices Inc.

"Checks indicate that Microsoft is likely to engage in headcount reductions to the tune of 6,000 to 8,000 employees or 6 per cent to 8 per cent of its 95,000 workforce," said McAdams Wright Ragen analyst Sid Parakh. "Our checks also revealed some speculation over the potential for a second round of cuts in some groups sometime later in the year."

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