John Paczkowski

Recent Posts by John Paczkowski

Microsoft Layoffs: There’s a First Time for Everything

Large workforce reductions have never really been a part of Microsoft’s culture. In its 34-year history, the company has never undergone cuts of the sort that it’s rumored to have been considering since last month.

Well, there’s a first time for everything. And Microsoft’s (MSFT) first time may come this week. When the company posts second-quarter financials Thursday, analysts expect it to miss its earnings per share forecast and to outline a series of cost-cutting measures. “Checks indicate that Microsoft is likely to engage in headcount reductions to the tune of 6,000 to 8,000 employees or six percent to eight percent of its 95,000 workforce,” McAdams Wright Ragen analyst Sid Parakh told Reuters. “Our checks also revealed some speculation over the potential for a second round of cuts in some groups sometime later in the year.”

The six percent to eight percent figure Parakh cites is about half the worst-case-scenario cut that has been rumored, but it’s grim nonetheless. And entirely possible, given similar bloodlettings at AT&T (T), Dell (DELL), and others.

Of course it’s equally possible that Microsoft could cut costs through attrition and the postponement of some major construction efforts. As the Seattle Post-Intelligencer notes, by postponing some large office projects and not renewing some leases, Microsoft could save about $82 million in capital expenditures during the remainder of its current fiscal year, and about $525 million the next. Whether that’s enough to keep everyone up in Redmond gainfully employed through the downturn remains to be seen.