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Last Updated: Wednesday, 7 July, 2004, 12:02 GMT 13:02 UK
Microsoft 'to cut costs by $1bn'
Microsoft chief executive Steve Ballmer
Mr Ballmer wants Microsoft to listen to customers and shareholders
Software giant Microsoft wants to slash annual costs by $1bn after detecting a sharp rise in spending over the past three years, reports say.

The cost cut target was set out by Microsoft chief executive Steve Ballmer in a memo sent to each of the company's 57,000 staff this week.

In it, Mr Ballmer warned Microsoft's expenses had grown faster than revenues for each of the last three years.

"This is obviously not a trend we can continue," he wrote.

The memo was sent to mark the start of Microsoft's new financial year on 1 July.

The planned cuts - which news agencies said would take effect this financial year - would come about "primarily by rethinking how we do things", Mr Ballmer wrote.

Some cuts are likely to come from consolidating Microsoft's event planning and customer relations activities.

But employees have already felt the pinch, with free towels disappearing from shower rooms and payments required from staff for some branded drugs prescribed on the firm's health plan.

In his memo, Mr Ballmer warned that Microsoft must avoid the classic mistakes of global corporate giants if it is to stay ahead of its competitors and reinvigorate its share price.

He argued that the best way of doing so was to remain sensitive to the needs of customers and shareholders.

"Nothing solves 'big company' ills quite like a strong focus on accountability for results with customers and shareholders," he wrote.

Microsoft has a $56bn cash pile, but some investors are concerned that its dominance of desktop computer software may mean it faces a mature market.

Its reputation has also been damaged by a proliferation of viruses which exploit vulnerabilities in the firm's software, run on most of the world's computers.

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