Microsoft Plans Spending Cut, Pay Boost

With profit falling short of expectations and its stock trading at a two-year low, Microsoft (ticker symbol: MSFT) plans to slash some spending while boosting pay to keep its workers happy, Chief Executive Steve Ballmer told employees in a recent memo.

The software giant will exit some non-core businesses and cut back on travel and entertainment expenses, while giving workers raises or bonuses to offset paper losses on once-vaunted stock options, Ballmer wrote last week.

“Our ongoing goal is that our base salaries are higher than two-thirds of the companies in the industry. We have drifted behind that target and the stock market drop makes employees, new and old, more sensitive to cash compensation,” Ballmer wrote.

Ballmer cited the problems facing many Microsoft partners and customers in the personal computer market, where a sales slump is expected to continue, in calling for significant spending cuts across the company.

On Friday, Microsoft’s shares tumbled 12% after the company issued a rare warning that profit would fall short of expectations because of slow PC sales.

News of Ballmer’s cost-cutting plans didn’t help Microsoft stock on Tuesday: It fell $3 to close at $44.81 in Nasdaq trading, the lowest price since late 1998.

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Trading Down

Brokerage shares have fallen along with the market since Labor Day as stock trading and investment banking activity have slowed.

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Amex brokerage index, weekly closes and latest

Tuesday: 526.87

Source: Bloomberg News