Microsoft to lay off 15,000?

News in the world economy has been dismal for months, and the technology sector has fared no better than than national averages. Now another industry giant, Microsoft,  may be showing signs of weakness.

A substantial rumor has surfaced that the Redmond software giant may be laying off as many as 15,000 employees worldwide. That number would amount to approximately 17% of the Microsoft workforce. According to a rumor floated by the Fudzilla blog, these personnel cuts will begin on January 15, which is exactly a week before Microsoft’s second-quarter earnings report, due to be released on January 22.

Fudzilla sees the biggest cuts coming in the MSN area of the company, which has had its share of disappointments over the past few years. The blog says “So far, we haven’t managed to confirm what departments or regions will be hit the worst, but we’re hearing that MSN might be carrying the brunt of the layoffs. We’re also hearing rumors about the possibility of somewhat larger staff cuts at Microsoft EMEA (Europe, Middle East and Africa). It’s unlikely that Microsoft will be laying off a lot of people in departments and regions that are doing well, and considering the recent upturn in console sales, we have a feeling that at least most of the people working in the Xbox 360 departments will be pretty safe.”

The MSN operating unit was recently taken over by Yusuf Mehdi, who was previously director of worldwide sales and marketing, business development and network programming for the MSN network. The MSN business unit, which runs MSN Search, MSN.com, My MSN, MSN Music, MSN Video, MSNBC, MSN Money, MSN Autos, MSN Shopping, and the rest of the MSN.com information channels, is a fat target for such a layoff decision.

Not everyone agrees with the Fudzilla reports, especially in its specifics. For example, financial veteran Henry Blodgett, in a report by CNET, was quoted as saying, “Unless Microsoft’s business has been absolutely crushed in the past two months, there is no reason for the company to suddenly cut this much cost. Microsoft’s margins are still fine, and much of its revenue is generated from multi-year contracts (and is therefore unlikely to see a massive intra-quarter hit).”

Blodgett also sees a possible Yahoo connection, saying “The only way we could see Microsoft laying off this many people is if the company decided to eliminate business units. And if Microsoft did decide to restructure its business, it would likely sell rather than shut down divisions, including MSN (If Microsoft wants to get out of the consumer Internet business, which it should, the best way to do it is to spin its online operations into Yahoo in exchange for a big piece of the company.)”

Financial problems in the technology sector are not limited, obviously, to new or relatively weak  companies. Microsoft is one of the strongest financial players in the technology area. If the downturn in the economy, which has caused belt-tightening in all sectors of the economy, can cause significant cuts in a company as stable as Microsoft, the rest of the sector may have a very rough year ahead of it.

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