Earnings Miss, Layoffs in Q2'09

The global economic slowdown brought PC unit growth to a standstill, causing Microsoft to fall short of its predictions for revenue and earnings, in the quarter ended Dec. 31, 2008 (Q2 of Microsoft’s 2009 fiscal year). As a consequence of the shortfall—only the second in Microsoft history—the company announced plans to cut expenses, including 1,400 layoffs immediately and a net headcount reduction of 2,000 to 3,000 over the next 18 months.

Total quarterly revenue was US$16.63 billion, up less than 2% from the previous year’s quarter and short of the company’s low-end expectations of US$17.3 billion. Operating income of US$5.94 billion was down 8% from the previous year, compared with low-end expectations of US$6.1 billion. In an unprecedented move, the company did not offer detailed revenue predictions for next quarter or the remainder of the fiscal year, stating that a severe worsening of macroeconomic conditions in the second half of the quarter gave it a higher range of possible future outcomes than usual, making predictions highly unreliable.