Cuts will be made across an array of departments including R&D, marketing, sales, finance, legal, HR and IT.
The cost-saving measures will reduce Microsoft's annual operating expense run rate by about $1.5 billion, and reduce fiscal year 2009 capital expenditures by $700 million, the company said.
Microsoft currently employs over 94K workers worldwide.
Earnings
Year-on-year, operating income for the second fiscal quarter ended in December was down 8 percent to $5.94 billion; net income was down 11 percent to $4.17 billion; and earnings per share were down 6 percent to 47 cents.
Overall revenues were up 2 percent to $16.63 billion, driven by increased SQL Server and Windows Server revenues, as well as Xbox revenues.
Xbox
The Entertainment and Devices Division, which houses the Xbox business, reported revenues of $3.18 billion, an increase of 3 percent year-on-year.
But operating income for the quarter took a 60 percent dive to $151 million, "primarily due to increased cost of revenue, research and development expenses, and sales and marketing expenses," the company said.
Xbox 360 and PC game revenue increased $135 million, or 6 percent, primarily driven by Xbox 360 software and hardware. The gains were partially offset by a September hardware price cut.
Microsoft shipped 6 million Xbox 360s during the quarter, versus 4.3 million shipped during the comparable quarter a year prior. The firm said during the first six months of the fiscal year it shipped 8.3 million Xbox 360s compared to 6.1 million a year ago.
Revenue decreased for the Zune media player, which is also housed in the EDD, by $100 million, or 54 percent as sales of the device slowed.
CEO Steve Ballmer commented, “While we are not immune to the effects of the economy, I am confident in the strength of our product portfolio and soundness of our approach.
“We will continue to manage expenses and invest in long-term opportunities to deliver value to customers and shareholders, and we will emerge an even stronger industry leader than we are today.”
Microsoft shares were down over 10 percent to $17.38 in afternoon trading.