Major layoffs at Microsoft

Tech giants are feeling the pinch

The recession is taking a toll on tech giants.

On Thursday, Microsoft initiated its first major layoffs and Google took a $1.09 billion charge to reflect the declining value of its investments in other tech firms. The recession-related fallout, disclosed in quarterly earnings reports, came one day after Apple posted record quarterly earnings.

Of the three companies, Microsoft is the most dependent on PC sales, which are way down. Accordingly, it has been hardest hit by the spending downturn.

Microsoft’s profit dropped 11% to $4.17 billion in its second quarter ended Dec. 31; revenue rose 1.6% to $16.63 billion. The tech giant said it would trim 5,000 jobs during the next 18 months as part of overall cost cutting, although it would hire some 2,000 more in certain areas for a net loss of 3,000 staffers.

“We’re certainly in the midst of a once-in-a-lifetime set of economic conditions,” CEO Steve Ballmer said during the earnings calls. He said the recession is resetting consumer and business spending at a lower level.

Although the company trimmed $600 million during the last quarter, Ballmer said it was not enough in this economic climate. Microsoft laid off 1,400 workers on Thursday and expects the associated charges to be less than $100 million. Its layoffs come a day after Intel said it would trim at least 5,000 staffers due to lower demand for its computer components.

The outlook was sunnier at Google. The Netco’s profit slipped for the first time in the fourth quarter, but the search giant topped Wall Street expectations.

With the charge for Clearwires and AOL investments, company’s profit dropped 68% to $382 million for the quarter ended Dec. 31. Revenue rose 18% to $5.7 billion, reflecting slowed growth.

Netco also initiated a stock swap to give staffers with higher value shares more incentive to stay and cash out later. The company, which recently announced it would be shedding a small number of jobs, said it’s still hiring.

Earlier this week, new Yahoo topper Carol Bartz instituted a hiring freeze at that Netco. During Microsoft’s analyst call, Ballmer indicated he is still interested in pursuing a search deal with the company.

(The Associated Press contributed to this report.)

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