Microsoft Readying Cuts, Not Necessarily Jobs

Microsoft will soon begin cutting costs, but this doesn't necessarily mean they will be cutting jobs.

In order to battle against the current economic climate Sony announced at the end of last year that they would cut up to 16,000 temporary and permanent jobs. Now Microsoft are planning to reduce costs to offset the credit crunch and ensure profitability.

At first it was thought that Microsoft was preparing to cut a massive 17% of their staff (in comparison to Sony's 5%) or 15,000 employees. However, Jim Goldman of CNBC has been told that this speculation was "grossly exaggerated" and that cuts would be made through the non-renewal of contract employees, rather than through a mass lay-off.

Goldman's source explains that it's still imperative for Microsoft to stay ahead of the game; "any company not paying careful attention to headcount in a climate like this is nuts."

It's doubtful that the Xbox division will be subjected to major cost cuts, since Microsoft has made it clear that the Xbox 360 is in fact "recession proof." The console had its best year at retail in 2008.

However, reductions have already occurred in Microsoft's Internet Explorer division. The Seattle Times reported that 180 contract workers were told that their services would not be renewed. The browser's market has already slumped from 74% to 68%, mainly due to the success of competing browsers Firefox and the recently released Google Chrome.

Microsoft will report its second quarter earnings at the end of January. If a cost-cutting strategy is to be announced, that will be the time to do so.