Reports from the US suggest that Microsoft is preparing to make as many as 15,000 employees of its 90,000 strong workforce redundant.
It is thought that between 10 and 17% of both the company's full-time and contracted employees are to be axed, with rumours stating that the cut will be made on 15 January - a week before Microsoft releases its Q2 earnings results.
The staff cuts are expected to come from the EMEA region, and a 10% reduction in its staff could apparently save the company $1.2 billion (around £826 million) a year.
"The prevailing wisdom on Microsoft is that the company may pre-announce disappointing December results", said Brad Reback, analyst at Oppenheimer & Co.
"Should such headcount reductions materialise, we would view them as a positive sign that management is interested in preserving the company's operating margin structure through the downturn".
Gamers and employees of Microsoft's entertainment division probably need not worry - the Xbox 360 side of the business has been maintaining profitability recently.
Just last month, Microsoft's big rival Sony announced it had plans to cut 8000 jobs by 2010 due to the economic squeeze, although David Reeves stressed that the games department in Europe was not planning any redundancies.