The company said that in light of the "further deterioration" of the global economy, 5,000 jobs will go in R&D, marketing, sales, finance, legal, HR, and IT.
Steve Ballmer, Microsoft chief executive said: "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."
The cutbacks come as Microsoft announced that it posted revenue of $16.63bn during the last three months of 2008 with pre-tax profit down 11% year on year to $4.17bn.
"Economic activity and IT spend slowed beyond our expectations in the quarter and we acted quickly to reduce our cost structure and mitigate its impact," said Chris Liddell, chief financial officer at Microsoft. "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."
Microsoft does not break out the performance of its individual commercial divisions such as Microsoft Advertising. However, its online services business unit, which houses that operation along with content operations such as MSN and other global businesses, suffered an increase in pre-tax losses from $247m to $471m.
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