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Microsoft, Intel and Sophos announce job cuts

Microsoft, Intel and Sophos announce job cuts

The three companies report belt tightening measures, with Microsoft announcing up to 5000 staff will be affected.

Microsoft's revenue rose 2 percent for the quarter ended Dec. 31, but net income fell 11 percent, it said Thursday. The company made a net profit of US$4.17 billion on revenue $16.6 billion in the quarter.

Software client revenue fell 8 percent, as PC sales slumped and buyers turned to low-cost netbooks. Annual software license fees pushed server and software tool revenue up 15 percent, while entertainment and devices revenue grew 3 percent on the back of holiday demand for the Xbox game console.

Microsoft said it will cut up to 5,000 jobs in research and development, marketing, sales, finance, legal, human resources and IT over the next 18 months. The first 1,400 jobs will be cut Thursday.

Vista was seen as the main culprit for the layoffs. Windows Vista has been trouble for Microsoft perhaps since the operating system's beginning. And this last quarter was certainly no exception. Despite a dip in client software revenue, however, one analyst says the workforce reduction Microsoft detailed on Thursday is healthy -- at least from enterprise IT shops' perspective.

"Windows Vista didn't do well. Based on our data, a lot of clients are skipping Windows Vista," said Neil McDonald, an analyst at Gartner. Indeed, nearly every other major analyst firm found a similar lack of Vista adoption, with Forrester Research likening the OS to the failed New Coke.

At the same time that IT shops are holding out for Windows 7, there's a global recession and significant uptake in netbooks, all three of which mean that people are simply not replacing their PCs as often as they once did, McDonald says.

Intel, meanwhile, took two corrective steps this week, aggressively slashing prices on chips on Monday and announcing Wednesday that it would close four chip plants and cut as many as 6,000 jobs.

Analysts laid the blame for Intel's actions on weak PC sales combined with tight-fisted consumers choosing low-cost models such as netbooks. They also said impressive new CPUs from rival Advanced Micro Devices were a factor.

The price cuts were just the beginning. On Wednesday, Intel said it would close close two assembly and test facilities -- one in Penang, Malaysia, and another in Cavite, the Philippines. It said it would also stop production at two wafer-production plants: Fab 20, an older 200mm wafer fabrication plant in Hillsboro, Oregon; and D2, a facility in Santa Clara, California.

The changes will affect between 5,000 and 6,000 employees worldwide, Intel said. Not all those employees will lose their jobs, however, as Intel plans to offer some of them positions at other facilities, the company said.

Intel will gradually close the facilities between now and the end of 2009, it said. The closures are designed to "align its manufacturing capacity to current market conditions," the company said.

Security vendor Sophos, meanwhile, bared plans to lay off up to 5 percent of its staff.

Engineering and product development staff will not be affected, with the 75 jobs to be cut all in sales and marketing, said spokesman Graham Cluley. The changes are intended to make those departments more efficient, and are not related to world economic conditions, he said.

Sophos will try to move affected employees into other positions within the company, he said. The company employs about 1,500 people worldwide, with around 600 in the U.K.

Sophos makes enterprise-level antivirus and antispam software and other security products for a variety of operating systems and platforms. It does not make a consumer product.

Sophos is a private company and reports its financial results once a year. In its last report, from March 2008, Sophos saw its billing revenue rise from US$167.3 million in 2007 to $213.9 million in 2008, a rise of 27.8 percent.

The company attributed the growth to investments in marketing, a stronger product line and more demand for software capable of several different security functions.

Sophos spent $20.9 million on sales in 2008, or about 12 percent of the company's revenue. That was up from $16.8 million in 2007.

Sophos joins other technology companies that are undertaking belt-tightening measures.

Symantec said in October it would reduce the cost of its workforce by 4.5 per cent but did not detail how many people in its 17,800 or so workforce would lose their jobs. The company said it expected lower IT spending.

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