Microsoft Will Cut 5,000 Jobs, Reduce CapEx

Microsoft (MSFT) said this morning that it will eliminate up to 5,000 jobs over the next 18 months, including 1,400 layoffs today. The job cuts were expected, but significantly lower than some recent rumors suggested. While cutting staff in some areas, Microsoft will continue hiring in others, resulting in a net headcount reduction of 2,000 to 3,000 employees.   

"To increase efficiency, we’re taking a series of aggressive steps," Microsoft CEO Steve Ballmer said in a letter to employees. "We’ll cut travel expenditures 20 percent and make significant reductions in spending on vendors and contingent staff. We’ve scaled back Puget Sound campus expansion and reduced marketing budgets. We’ll also reduce costs by eliminating merit increases for FY10 that would have taken effect in September of this calendar year."

The company's 10Q filing with the SEC says Microsoft will also scale back capital expenditures as part of the cost-cutting, which is designed to trim annual expenses by $1.5 billion. The filing and press release did not break out the projected savings, and it wasn't immediately clear whether how the cuts might impact the company's data center operations. Further details are likely later today.

In October Microsoft said it would reduce its 2008 investment in data center expansion by $300 million, citing the economic slowdown and the need to cut expenses. 

Microsoft is nearing completion on the first phase of its $500 million data center in Northlake, Illinois, and has announced plans for similar $500 million projects in Dublin, Ireland and West Des Moines, Iowa. The company has already opened huge new data centers in Quincy, Washington and San Antonio.