Citing the decline of the global economy as the main reason, Microsoft Confirmed that it will lay off 5000 employees over the next 18 months.
In spite of increased revenue, Microsoft's total profits for the fourth quarter of 2008 declined to $4.17 billion from $4.71 billion in the same period last year.
For the company's Entertainment and Devices Division, Xbox 360 and PC revenue increased, but it was offset by the decrease Zune music player revenue.
Microsoft says it shipped 6 million Xbox 360 consoles during the quarter, compared to 4.3 million in the previous year. In all, 8.3 million Xbox 360 consoles were shipped in the last six months of 2008, versus 6.1 million consoles in the year previous.
"In response to the realities of a deteriorating economy, we're taking important steps to realign Microsoft's business," CEO Steve Ballmer said in a company-wide memo.
The memo then explained that the reductions will be made "in the areas of R&D, marketing, sales, finance, [legal], HR, and IT over the next 18 months."
"The decision to eliminate jobs is a very difficult one," wrote Ballmer in his memo. "Our people are the foundation of everything we have achieved and we place the highest value on the commitment and hard work that you have dedicated to building this company."
"But we believe these job eliminations are crucial to our ability to adjust the company's cost structure so that we have the resources to drive future profitable growth," he concluded.