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Microsoft Mum on Rumored Layoffs

Bloggers and analysts on Monday poured cold water on rumors that Microsoft plans to lay off a substantial number of its employees. The rumors, which surfaced in late December, suggested that the company might shave off as much as 17 percent of its 95,000-plus workforce.

Two blogs that started the rumors -- Fudzilla and Mini-Microsoft -- have both backed off from their first reports, which suggested that up to 15,000 Microsoft employees could be cut.

The widespread speculation about workforce cuts at Microsoft may have been fueled, in part, by a remark CEO Steve Ballmer made at a Microsoft shareholder meeting in November. Ballmer told shareholders that Microsoft will look to reduce costs in 2009 by "utilizing its resources more and reducing the head count…."

Ballmer is scheduled to address the International Consumer Electronics Show 2009 in Las Vegas as the keynote speaker on January 7.

To date, none of the sources speculating about the personnel reductions have been identified, and Microsoft has issued no formal statement. A CNBC story quoted an unnamed "Microsoft source" confirming that the company is considering employee cutbacks. However, that source described the rumors of broad reductions as "grossly exaggerated."

Still, economic challenges in the new year can be expected for many companies, even for Microsoft.

"The current economy is certainly cutting into the IT sector. However, we see an across-the-board cut by Microsoft as very unlikely," said Matt Rosoff, lead analyst for Directions on Microsoft in a telephone interview. "That said, the possibility of some sort of reorganization with some business units being reassigned, or eliminated, is likely given the economic challenges and Microsoft's business structure."

Some reports have speculated that contract workers would be the most vulnerable to job cuts. The Seattle Times reported last week that contracts with some outsource firms have been "abruptly cut short."

Rosoff confirmed that speculation, saying that Directions on Microsoft had "anecdotally heard" that many third-party contractors have had contracts "diminished in size."

"Microsoft has done very well with more than $60 billion in revenues this past year," Rosoff said. "It is not the kind of company that is going to make across-the-board cuts."

Microsoft has grown from approximately 17,000 workers in 1995 to more than 95,000 in 2008, according to company employment statistics. Microsoft hired more than 1,000 employees in October and then slipped to only 380 new hires in November, according to the Seattle Tech Report's Microsoft blog. Employment numbers for December are scheduled to be released this week.

Microsoft is scheduled to announce its second-quarter earnings on January 22.

About the Author

Herb Torrens is an award-winning freelance writer based in Southern California. He managed the MCSP program for a leading computer telephony integrator for more than five years and has worked with numerous solution providers including HP/Compaq, Nortel, and Microsoft in all forms of media.

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