Not even high-tech is immune from the economic meltdown.
Despite predictions — wishful thinking? — by some financial analysts that it would remain relatively unscathed, Silicon Valley and the rest of the industry buckled under distressing news Thursday.
Microsoft msft announced 5,000 layoffs — its biggest cutback ever — and Sony sne said it will report an operating loss for the first time in 14 years: $1.65 billion. A day earlier, Intel said it will close several older factories, displacing 5,000 to 6,000 workers.
It is sobering news for the tech industry, which had resisted the gravitational pull of the tottering economy over the past year as consumers continued to snap up laptops and iPhones.
Not anymore. In the span of several weeks, orders for both business and consumer tech products have cratered, and technology companies began shedding workers.
Despite heartening quarterly results from Google goog and Apple aapl this week, and job losses that aren't as deep as those in the financial and automotive industries, the tech industry is suffering its worst downturn since the dot-com bubble burst in the early 2000s. As jobs evaporate, so too is funding for tech companies both large and small.
Microsoft stunned Wall Street shortly after sunrise on the West Coast by announcing plans to slash 5,000 jobs as part of a $1.5 billion cutback in spending. The software giant also reported sales in its fiscal second quarter that fell $900 million short of what it had earlier forecast — a rarity for the company.
At about the same time, CEO Steve Ballmer sent a memo to 96,000 employees explaining that 1,400 of them would be let go immediately, with 3,600 more job cuts coming over the next 18 months, representing a 5% workforce reduction.
Underscoring the gravity of the situation, the tough-talking Ballmer participated on the software giant's earnings conference call and painted a grim picture. He said consumers cannot refinance their homes and have no discretionary income to buy a second or third PC. Businesses, meanwhile, are laying off hundreds of thousands of workers and cutting spending for hardware and software.
"We certainly are in the midst of a once-in-a-lifetime set of economic conditions," Ballmer said. "Neither the consumer nor the business side of the technology industry is immune to these economic conditions."
Microsoft reported a profit of $4.17 billion, or 47 cents a share, in the quarter ended Dec. 31. Revenue rose 2% to $16.6 billion. Wall Street generally expected $17.1 billion in revenue and a profit of 49 cents a share. What's more troubling: Ballmer declined to offer reassuring guidance on how the software giant might perform in upcoming quarters.
In the current environment, efficiency has become the company's watchword, Ballmer said. Salary raises will be suspended, travel cut 20%, the marketing budget reduced and expansion of the company's sprawling campus in Redmond, Wash., scaled back. Microsoft will still do some strategic hiring, to fill new jobs supporting Internet search, for instance. Net job reduction: 2,000 to 3,000.
"The company seems to be making its best effort to cut only to the extent where it seems absolutely necessary," says Sid Parakh, tech stocks analyst at McAdams Wright Ragen.
Sony's profit forecast turns to loss