In this morning’s press release about lay-offs and budget cuts, the company blamed the loss of revenue on soft PC sales and the increasing popularity of netbooks.
Client revenue declined 8% as a result of PC market weakness and a continued shift to lower priced netbooks.
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Microsoft will eliminate up to 5,000 jobs in R&D, marketing, sales, finance, legal, HR, and IT over the next 18 months, including 1,400 jobs today. These initiatives will reduce the company’s annual operating expense run rate by approximately $1.5 billion and reduce fiscal year 2009 capital expenditures by $700 million.
Microsoft has uploaded a webcast of Steve Ballmer (CEO), Chris Liddell (SVP and CFO), Frank Brod (corporate VP and chief accounting officer), and Bill Koefoed (GM of Investor Relations) to “discuss details of the company’s performance for the quarter and certain forward-looking information.” The webcast is available at http://www.microsoft.com/msft through the end of the day, today.
Also, TechFlash has posted Ballmer’s memo to employees about the lay-offs. The three-pronged approach seems to geared towards presenting a consistent message. In his email, Ballmer writes, “Our financial position is solid. We have made long-term investments that continue to pay off.” This echoes his quote in the official press release: “…I am confident in the strength of our product portfolio and soundness of our approach. We will continue to manage expenses and invest in long-term opportunities to deliver value to customers and shareholders…”
The market doesn’t seem to be buying it. Microsoft traded as low as $17.07, today, down 12%, the lowest price since January 1998, and its largest percentage drop since November 2000. Microsoft ended the day down 11.7 percent, at $17.11.
The laundry list of disclaimed factors that could inhibit MS emerging as “an even stronger industry leader” includes just about every conceivable eventuality, some vaguely worded enough to cover multiple causes, including a giant meteor colliding with the Earth or radioactive weasels invading Redmond. Neither is as likely as more legal woes: in 2007 Microsoft spent $1.8 billion on legal fees related to an European Commission (EC) fine, itself $1.4 billion.