Microsoft Reports Lower Earnings, Cuts 5,000 Jobs

Amidst lower than expected 4th quarter earnings Microsoft has announced it will slash 5,000 jobs over the next 18 months.

Prior to Microsoft's release of their 4th quarter earnings the company reported they would cut up to 5,000 jobs in research and development, marketing, sales, finance, legal, human resources and IT. With the first 1,400 job cuts coming as early as this afternoon.

In today's earnings report Microsoft announced revenue of $16.63 billion for the second quarter ending Dec. 31, 2008, a 2% increase over the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $5.94 billion, $4.17 billion and $0.47, declines of 8%, 11% and 6%, respectively, compared with the prior year.

“Economic activity and IT spend slowed beyond our expectations in the quarter, and we acted quickly to reduce our cost structure and mitigate its impact,” said Chris Liddell, chief financial officer at Microsoft. “We are planning for economic uncertainty to continue through the remainder of the fiscal year, almost certainly leading to lower revenue and earnings for the second half relative to the previous year. In this environment, we will focus on outperforming our competitors and addressing our cost structure.”

Microsoft says revenue declined 8% as a result of PC market weakness and a continued shift to lower priced netbooks. But one has to wonder how much the failure of Vista and the lower than expected adoption rates has really hurt the company.

According to at least one report Vista might have a great role in the drop in revenues than expected. Tom Sullivan at InfoWorld writes: "Windows Vista has been trouble for Microsoft perhaps since the operating system's beginning. And this last quarter was certainly no exception."

"Windows Vista didn't do well. Based on our data, a lot of clients are skipping Windows Vista," said Neil McDonald, an analyst at Gartner. Indeed, nearly every other major analyst firm found a similar lack of Vista adoption, with Forrester Research likening the (operating system) to the failed New Coke.

Vista clearly isn't to blame for all of Microsoft's woes but you've got to admit that they have suffered some set backs because of it.