Microsoft seeking US$1bn in cost cuts

7 Jul 2004

Software behemoth Microsoft is understood to be planning to cut costs by US$1bn annually because the company’s expenses have grown faster than its revenues for three years running.

According to reports in the Wall Street Journal, Microsoft CEO Steve Ballmer (pictured) issued a memo to the company’s employees earlier this week laying out US$1bn in cost cutting. He also promised to step up innovation and boost the company’ sales levels and stock prices.

It is understood that Ballmer plans to achieve the US$1bn cost cutting within the current fiscal year, ending 30 June 2005.

The cuts will come from employee benefit changes and primarily from savings from unifying its marketing and advertising across business units, and consolidating the number of outside partners it uses for event planning, direct mailing and other customer relations activities.

He also urged employees to take more accountability for their work, setting more realistic goals and meeting them.

In the memo Ballmer said: “We must also work to change a number of customer perceptions, including the views that older versions of Office and Windows are good enough, and that Microsoft is not sufficiently focused on security.”

The opportunity in the PC market remains strong, Ballmer said, adding that he believes the number of PC users worldwide will reach 1 billion by 2010, up from 600 million, led by growth in emerging markets.”We must continue to compete as relentlessly as ever, while also reflecting our industry leadership responsibilities,” Ballmer wrote. He said the latest server operating system is capable of taking on Linux.

“With Windows Server 2003, we can compete for every commercial workload running on Linux or Unix today – even mainframes and high-performance computing – at lower cost, more efficiently and more reliably,” he wrote.

By John Kennedy