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Microsoft Plans Spending Cut, Pay Boost

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From Reuters

With profit falling short of expectations and its stock trading at a two-year low, Microsoft (ticker symbol: MSFT) plans to slash some spending while boosting pay to keep its workers happy, Chief Executive Steve Ballmer told employees in a recent memo.

The software giant will exit some non-core businesses and cut back on travel and entertainment expenses, while giving workers raises or bonuses to offset paper losses on once-vaunted stock options, Ballmer wrote last week.

“Our ongoing goal is that our base salaries are higher than two-thirds of the companies in the industry. We have drifted behind that target and the stock market drop makes employees, new and old, more sensitive to cash compensation,” Ballmer wrote.

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Ballmer cited the problems facing many Microsoft partners and customers in the personal computer market, where a sales slump is expected to continue, in calling for significant spending cuts across the company.

On Friday, Microsoft’s shares tumbled 12% after the company issued a rare warning that profit would fall short of expectations because of slow PC sales.

News of Ballmer’s cost-cutting plans didn’t help Microsoft stock on Tuesday: It fell $3 to close at $44.81 in Nasdaq trading, the lowest price since late 1998.

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Trading Down

Brokerage shares have fallen along with the market since Labor Day as stock trading and investment banking activity have slowed.

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Amex brokerage index, weekly closes and latest

Tuesday: 526.87

Source: Bloomberg News

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