Microsoft has confirmed that 5000 jobs will be cut, with 1400 to go immediately.
The remaining 3600 jobs will be axed over the next 18 months, and will include positions in R&D, marketing, sales, finance, legal, HR and IT.
The job losses come as the company reveals its figures for Q2. Revenues were up 2% compared on the previous year with $16.63 billion reported.
Operating income and net income were down 8% and 11% respectively, reported at $5.95 billion and $4.17 billion.
Good news for gamers is that revenues for the firm's Entertainment and Devices division, which includes the Xbox business, was up 3%, to $3.18 billion.
"While we are not immune to the effects of the economy, I am confident in the strength of our product portfolio and soundness of our approach", said Steve Ballmer, CEO at Microsoft.
"We will continue to manage expenses and invest in long-term opportunities to deliver value to customers and shareholders, and we will emerge an even stronger industry leader than we are today".
Chris Liddell, chief financial officer at Microsoft added: "We are planning for economic uncertainty to continue through the remainder of the fiscal year, almost certainly leading to lower revenue and earnings for the second half relative to the previous year".
"In this environment, we will focus on outperforming our competitors and addressing our cost structure".