Microsoft, Intel to Cut up to 11,000 Jobs

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By Mike Caggeso
Associate Editor
Money Morning

Microsft Corp. (MSFT) and Intel Corp. (INTC) yesterday (Thursday) announced they will cut up to 11,000 jobs and could no longer give quarterly forecasts with global economic uncertainly, after the two tech giants announced declines in the final three months of 2008.

Microsoft posted a profit of $4.17 billion, or 47 cents a share, for its fiscal second quarter ended December 31, compared with $4.71 billion, or 50 cents a share, a year earlier.

Microsoft said it would cut up to 5,000 jobs in research and development, marketing, sales, finance, legal, human resources, and information technology in next 18 months, with 1,400 of those job cuts coming immediately.

The goal is to cut operating expenses by $1.5 billion in its 2009 fiscal year and slash capital expenditures by $700 million, Microsoft said in a news release.

The announcement comes nearly a week after Microsoft sold its 7.26% (more than 150 million shares) in Comcast Corp. (CMCSA), which netted them about $3.4 billion. Microsoft initially invested $1 billion in the then upstart Comcast in 1997, Thomson Financial News reported.

“People aren’t buying PCs,” Kimberly Caughey, senior equity analyst at Fort Pitt Capital Group Inc., which owns 361,685 Microsoft shares, told Bloomberg. “They’re taking quick action to right-size their company. This is really only 22 days after the close of the quarter, and they must see deteriorating conditions.”

Meanwhile, Intel said it would close manufacturing plants in the Philippines, Malaysia and the Silicon Valley, a broad swipe that will cut up to 6,000 jobs.

The announcement came a week after Intel posted grim fourth-quarter earnings – revenue down 23% and profit tumbling 90%. It comes two days after Intel announced it was lowering prices by up to 40% on its premium quad-core chips.

“It’s not a surprise given that their first quarter is probably going to be challenging, and they're trying to do what they can to cut costs in places that make sense,” Taunya Sell, an analyst at Ragen Mackenzie, a division of Wells Fargo, told Reuters.

Meanwhile, with the global economy sinking and the health of chief executive Steve Jobs in question, Apple Inc. (AAPL) posted profit growth. Net profit for its fiscal first quarter ended December 27 rose to $1.61 billion, or $1.78 a share, up from $1.58 billion, or $1.76, a year ago.

“I'd say in the face of one of the worst holidays in recent memory, Apple was able to pull a rabbit out of the hat,” Edward Jones analyst Bill Kreher, told Reuters. “It's amazing that Apple was able to record its best revenue and earnings in an environment like this.”

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