As was feared, Microsoft has announced that it will slash 5000 staff from its workforce over the next 18 months as it revealed a sharp drop in profits.

Being described as a sign of how deeply the current recession is affecting industry, Microsoft has reported an 11% drop in its second quarter profit with 2008's Christmas period said to be the worst for a number of years.

Profits in the quarter ending 31 December dropped to $4.17 billion, down from year-ago earnings of $4.71 billion, meaning Microsoft missed Wall Street forecasts for the period.

The layoffs are being reported as a first for Microsoft, since it was founded in 1975, apart from staff cuts made from reorganisations after company acquisitions.

Earlier today rival Apple reported record results in what the company said was their best quarter to date.