Microsoft's 5,000 layoffs add to signs tech isn't immune

SAN FRANCISCO -- 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.

It is sobering news for the tech industry, which had resisted the gravitational pull of the tottering economy over the last 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.

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 the company had earlier forecast — a rarity.

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 jobs cut 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."