Microsoft says efficiency drive will save $1bn

Microsoft is cutting back on benefits and plans to save nearly $1bn this financial year.

Microsoft is cutting back on benefits and plans to save nearly $1bn through efficiency improvements and cost-cutting in its 2005 financial year, said Microsoft chief executive officer Steve Ballmer. The company's new fiscal year started on 1 July.

Over the past three years expenses at Microsoft have grown faster than revenue. "This is obviously not a trend we can continue," Ballmer said. The company's plan to save money includes better coordinated marketing, which it believes will save hundreds of millions of dollars.

The efforts to reduce costs have also hit Microsoft employees as the software maker has made changes to employee benefits. For example, employees will now have to pay part of the cost of brand name drugs if a generic alternative is available.

However, salaries will go up consistent with inflation and superior performers will receive bigger raises, he said. The CEO called upon employees to set clear and measurable goals and deliver on those commitments.

Meanwhile, Microsoft is having trouble getting customers, especially enterprises, to upgrade to the most recent versions of the products it has out today, including Windows XP, Windows Server 2003 and Office 2003.

Joris Evers writes for IDG News Service

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