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Microsoft To Cut 5,000 Jobs, Xbox 360 Division Revenues Up, Profits Down

Microsoft To Cut 5,000 Jobs, Xbox 360 Division Revenues Up, Profits Down Exclusive

January 22, 2009 | By Leigh Alexander, Staff

January 22, 2009 | By Leigh Alexander, Staff
More: Console/PC, Exclusive

Microsoft says it will lay off 5,000 workers over the next 18 months, nearly five percent of its total workforce, as the tech giant's total profits for the fourth quarter of 2008 declined to $4.17 billion from $4.71 billion in the same period last year.

The decline came in spite of a 2 percent increase in total revenues to $16.63 billion -- and, crediting the global economy, the company says it must take steps to manage costs.

The company's Entertainment and Devices Division, which contains its Xbox 360 and games businesses, saw $3.18 billion in revenue for the quarter, an increase of 3% over 2007's $3.07 billion. However, the division had less revenue in the second half of 2008 than it did in 2007 -- $4.99 billion versus $5.02 billion.

The company says that while Xbox 360 platform and PC game revenue drove the increase, it was offset by a decrease in revenue from the company's Zune music player. And while Xbox 360 platform and PC game revenue specifically was up 6 percent to $135 million, price reductions still offset the bottom line.

The five percent year-over-year revenue decline in the six-month comparison is because of the comparison to Halo 3's $330 million launch last year, the company adds.

Microsoft says it shipped 6 million Xbox 360 consoles during the quarter, compared to 4.3 million in the previous year. In all, 8.3 million Xbox 360 consoles were shipped in the last six months of 2008, versus 6.1 million consoles in the year previous.

Overall, " response to the realities of a deteriorating economy, we’re taking important steps to realign Microsoft’s business," CEO Steve Ballmer said in a company-wide memo.

According to Ballmer, the reductions will be made "in the areas of R&D, marketing, sales, finance, [legal], HR, and IT over the next 18 months" -- although 1,400 of the announced job cuts will be made tomorrow.

"The decision to eliminate jobs is a very difficult one," wrote Ballmer in his memo. "Our people are the foundation of everything we have achieved and we place the highest value on the commitment and hard work that you have dedicated to building this company."

"But we believe these job eliminations are crucial to our ability to adjust the company’s cost structure so that we have the resources to drive future profitable growth," he added.

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