Computer giant Microsoft announced that falling sales and profit will force it to cut staff numbers for the first time in its 34-year history, with 5000 jobs set to go across its global operations.
The announcement, which sent Microsoft shares to a three-year low, was followed by more bad news from internet auction site eBay, which announcied disappointing fourth-quarter results.
Only computer giant Apple provided a bright spot after it said it finished 2008 with a record quarterly profit.
Microsoft’s job cuts will affect roughly 5% of its total workforce and are part of several measures to help trim $US700 million from capital expenditures.
The group will also freeze salaries, cut travel costs by 20%, and delay office building expansions.
Chief financial officer Chris Liddell said in a statement that the cuts are due to the economy and tech sector slowing more than expected. “We acted quickly to reduce our cost structure and mitigate its impact.”
The group posted a drop in net profit during the December quarter from $US4.71 billion to $US4.17 billion. Sales of Windows software for personal computers fell 8% in the period to $US4.3 billion, disproving the company’s estimate of a 10% increase.
Microsoft says the company will be hit due to growing demand for cheaper, smaller computers known as “netbooks”, and company IT budgets being slashed.
The group’s shares took a dive, falling as low as $US17.19 – the lowest point since 2006.
Internet auction site eBay has also been hit by the downturn. The online marketplace reports a 31% fall in net-income in the final quarter of 2008, dropping to $US367 million from $US532 million.
While the company says full-year revenue was up 11% to $US8.54 billion, fourth-quarter revenue fell 7% to $US2.04 billion.
“We’ve been operating in an almost unprecedented external environment,” eBay chief John Donahoe says in a statement. “There is no doubt that eBay was impacted by the macro economy and our fourth quarter results reflect this.”
But despite the disappointing results from Microsoft and eBay, rival group Apple says it finished last year with a record quarterly profit on the back of iPod and Mac computer sales.
Apple recorded 2.52 million Mac sales in the final quarter, a 9% jump from the same period a year ago. It also posted a 3% increase in iPod sales to 22.73 million. Sales of the 3G iPhone also experienced an 88% rise from the same period in 2007 at 4.36 million.
The company’s total sales increased 6% to $US10.2 billion. Apple shares jumped $US9.83 to $US92.66.
“Even in these economically challenging times, we are incredibly pleased to report our best quarterly revenue and earnings in Apple history – surpassing $US10 billion in quarterly revenue for the first time ever,” Apple chief executive Steve Jobs says in a statement.
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Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
