For the three months ending December 31st the firm reported a net profit of $4.17bn. Shares fell 7.9 per cent on the news.
The firm confirmed that "the reduction of headcount-related expenses" will lead to 1,400 jobs being cut immediately, with a further 3,600 going in the next 18 months. Microsoft hopes to save $1.5bn a year and reduce its fiscal 2009 expenditure by $700m going forwards.
“While we're not immune to the effects of the economy, I am confident in the strength of our product portfolio and soundness of our approach," Microsoft chief executive Steve Ballmer stated.
UPDATED: Microsoft has told MCV that it cannot comment on whether the losses will impact its Entertainment and Devices Division, the home of its Xbox operations. Nor can it comment on the possible number of European jobs at risk.