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Microsoft Fargo cutting "small percentage" of its workforce; expansion project continues

Microsoft Fargo has cut "a very small percentage" of its workforce today as part of the 1,400 jobs Microsoft Corp. announced it cut this morning, a company spokeswoman told The Forum.

Beth Jordan, Microsoft spokeswoman, said she could not release the exact number of positions that were cut from Microsoft Fargo today. Nor could she release information about what those positions were.

"We won't get into specifics about who out of respect for our employees and their privacy," Jordan said.

She could not say whether there would be further workforce reductions at Microsoft Fargo as the company cuts an additional 3,600 jobs over the next 18 months.

Jordan did say that most of the cuts will be from Microsoft's Redmond, Wash., facility, where the company is based.

There have been a number of communications from Steve Ballmer, Microsoft Corp. chief executive officer, to employees to encourage them to focus on growing the business and doing what can be done in a tight market, Jordan said.

Severance benefits will be available to impacted individuals, said Katie Hasbargen, Microsoft Fargo spokeswoman.

The Microsoft Fargo employees whose positions were cut today were told of the layoffs before a conference call and webcast to discuss details of the company's performance, which started at 10 a.m., Jordan said.

Ballmer, Chris Liddell, senior vice president and chief financial officer, Frank Brod, corporate vice president and chief accounting officer, and Bill Koefoed, general manager of Investor Relations, hosted the call.

"We're certainly in the midst of once-in-a-lifetime economic conditions," Ballmer said during the call. "Neither the consumer nor the business side of the technology industry is immune to these economic conditions."

Liddell said during the call that the cuts are in the areas of research and development, marketing, sales, finance, legal, human resources, and information technology.

There will be no pay raises in the next fiscal year, he said.

Microsoft is known for offering employee benefits such as full medical coverage without payroll contributions or deductibles, childcare discounts and backup care options, matching charitable donations, and free beverages including Starbucks coffee, juice, milk and soda.

Jordan said the company wants to preserve the key components of the compensation packages that motivate employees to perform.

"At this point they are continuing to push forward some of our traditional bonus compensation opportunities as a means of making sure that employees are motivated to perform," Jordan said. "You'll see those pools shrink though."

Microsoft Corp. will also reduce facility costs, Liddell said during the conference call.

Jordan said she does not yet know how expansion of the Microsoft Fargo campus may be affected.

"We're focusing today on the reduction in force," Jordan said. "We as a company are still looking forward. We are still enthusiastic. We really don't have any comments on activities beyond what's happening today."

Noelle Hawton, a spokeswoman for Tunheim Partners, a public relations company in Bloomington, Minn., that works for J.E. Dunn Construction, which is working on the Microsoft Fargo expansion project, said construction is continuing as planned.

"Everything is full-steam ahead," Hawton said.

Microsoft Fargo broke ground in Oct. 2007 on a 185,000-square-foot building and expansion project.

The project includes a 120,000-square-foot addition that will be the third building on Microsoft's Fargo campus and will allow space for 570 to 600 employees. The project also includes renovating and expanding the existing Horizon Building by 65,000 square feet to add a new café, meeting rooms and a company store.

In August when Stephen Elop, one of Microsoft's top-five leaders, visited the campus for the first time, he pointed to the project, to be completed this summer, as an example of Microsoft Fargo's value to the company.

There are currently about 1,017 Microsoft Fargo employees. As of November, Microsoft Fargo had 500 vendor staff.

Microsoft Corp. also plans to significantly reduce vendor and contingent staff expenses, Liddell said.

Jordan said there are no announcements at this point on the possibility of vendor or contractor staff cuts at Microsoft Fargo. She said Microsoft will continue to evaluate its business and "make sure investments are aligned to revenue opportunities."

In November, 2007, Fargo city commissioners decided to give the company a 10-year, multimillion-dollar tax break on the addition to its south Fargo site.

At the time, the company planned to add 207 jobs in 2009, the first year of the exemption. All would pay more than $15 per hour, according Microsoft's application for the incentive.

The project will receive a complete tax exemption for five years, worth $817,687 per year, and a 50 percent break on the new construction for the remaining five years.

By The Forum's calculation, the incentive totals $6.13 million.

The software giant said today the moves were driven by deteriorating global economic conditions and lower client revenue, resulting from weakness in the PC market and a shift to lower-priced notebook models. Microsoft reported an 11 percent drop in second-quarter profit.

As of Sept. 30, Microsoft employed 94,286 people worldwide, which included 56,654 people in the United States, according to the company's Web site.

Microsoft Corp. says profit slipped to $4.17 billion, or 47 cents per share, from year-ago earnings of $4.71 billion, or 50 cents per share.

It says total revenue edged up 2 percent to $16.63 billion, as server, tools and entertainment sales helped offset an 8 percent drop in client revenue.

Microsoft says the initiatives will reduce the company's annual operating expense run rate by approximately $1.5 billion and reduce fiscal year 2009 capital expenditures by $700 million.

Companywide Microsoft continues to hire as needed. Every position is closely evaluated, Jordan said.