Ballmer said that the economy was in a 'once-in-a-lifetime' condition [EPA]

The firm announced on Thursday that it would let more than five per cent of its 95,000 employees worldwide go over the next 18 months - 1,400 immediately.

The move, and the announcement of an 11 per cent drop in second-quarter profit, struck Microsoft's stocks, which fell by 10 per cent, pulling the Nasdeq index down by three per cent.

The Dow Jones, the US main industrial index, also fell 219 points, about 2.6 per cent, in midday trading.

It is the first time the firm has laid employees off, bar limited staff cuts after the absorption of other companies, since its founding in 1975.

Intel outside

Steve Ballmer, Microsoft's chief executive, said: "We're certainly in the midst of a once-in-a-lifetime set of economic conditions.

"The perspective I would bring is not one of recession. Rather, the economy is resetting to lower level of business and consumer spending based largely on the reduced leverage in economy."

Microsoft still maintains $20.7bn liquidity, but the global recession and a faltering profit margin have forced the decision.

The news came one day after Intel Corp, the world's largest maker of microprocessors, said that it would cut jobs in its manufacturing plants in the Philippines and Malaysia and reduce its operations in the US.

Up to 6,000 staff will be affected between now and December 2009, although not all will be complete job losses.

The statistic for new homes being built in the US was at its lowest level since 1991 on Thursday, and the number of Americans signing on for job-seekers benefit was at a 26-year high.

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