Cautious Microsoft embarks on cost-cutting drive

Microsoft plans to wring out a cost saving of $400m to $500m (£248m to £309.6m) this fiscal year and next by reviewing its hiring plans and the amount spent on marketing.

Microsoft plans to wring out a cost saving of $400m to $500m (£248m to £309.6m) this fiscal year and next by reviewing its hiring plans and the amount spent on marketing.

This was part of the software kingpin’s strategy to weather what is reckons will be either a mild decline in economic activity – a best case scenario – or a full blown, deep recession.

The strategy was outlined as Microsoft unveiled first fiscal quarter results for the three months ended 30 September that showed a 9% climbing revenues to $15bn and a rise in profits to $4.37bn.

The results included 2% growth in sales for the Client division to $4.2bn, while Server and Tools revenues grew 17.2% to $3.4bn and the Business Division rose 20.2% to $4.9bn.

The market had clearly weakened in September, said Microsoft chief financial officer Chris Liddell.

“The credit crisis unfolded and many partners and customers were faced with market uncertainty and credit restrictions which impacted the rate at which they buy software,” he said.

This continued in October and while the Government has stepped in to “unfreeze the financial markets there will inevitably be some spill over into the real economy,” Liddell added.

While Microsoft said while it could not control the economy it could manage operating expenses, including “lower headcount related costs as we’ve reviewed our spending plans and are making adjustments to our headcount growth.”

Marketing budget will also be lowered to reflect the economy, though the vendor was not more specific about the impact on partners’ MDF.

It expects the results of these actions to bear fruit later this fiscal year and into the next but Liddell said “if macroeconomic conditions worsen we’ll endeavour to reduce our operating expenses accordingly.”

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