Microsoft cuts worker benefits to save cash

SEATTLE — Even with $60 billion cash in the bank, Microsoft Corp. is telling employees they’re not immune to corporate cost-cutting.

Microsoft told employees in an e-mail this week that it is trimming some benefits — including reduced prescription drug coverage and employee stock discounts — to save money.

The software giant will continue to offer perks such as free sodas and gym memberships, and the company says its benefits are still generous.

But they won’t be as lavish as in years past. John Connors, Microsoft’s chief financial officer, recently told employees the company hopes to save as much as $1 billion in its next fiscal year, which ends June 30, 2005. In addition to trimming benefits, Microsoft plans to combine some operations, make business units more efficient, and reduce spending on such things as travel, computers, catering and entertainment.

Microsoft spokeswoman Tami Begasse would not say how much the benefits reductions would save.

Marcus Courtney, president of the technology worker advocacy group WashTech, called the move “just the tip of the iceberg of what’s to come for Microsoft employees” and said it showed a lack of respect for employees’ contributions.

He said WashTech, which has made informal efforts to unionize Microsoft employees, had heard from a handful of workers unhappy with the change.

Analyst Charles Di Bona of Bernstein & Co. said shareholders should applaud the move because it shows a willingness on Microsoft’s part to cut the “fat” from its budgets to make up for the lulls between big, revenue-producing product launches.

“It really does signal that they’re starting to watch the operating expenses, which is a good thing,” Di Bona said. “Every company should do that. There’s no reason to waste money.”

One of the principal cost-saving changes involves an option for employees to purchase discounted shares of company stock.

Currently, employees may buy stock for 15 percent less than the market price as calculated at either the beginning or the end of a designated period, whichever is lower. There have been two such periods with the “look-back” provision each year.

Starting July 1, the discount will be reduced to 10 percent and the price will be based solely on the closing share price on the last day of each quarter.

Microsoft earlier halted a stock option plan that once made many employees millionaires but in recent years yielded little because of stagnant share prices. Microsoft now gives employees smaller amounts of stock outright.