First cost-cutting initiative in company's history includes 5,000 job cuts over next 18 months.

Microsoft Corp. said Thursday it will cut the rates it pays temporary staffing agencies by 10%, as part of a broader drive to save costs.

The Redmond, Wash.-based software giant, which launched a broad cost-cutting drive last month, has informed its temporary staffing agencies that it will reduce billing rates by 10%.
"We held discussions with some of the impacted agencies and settled on the 10% reduction based on the economic climate and the need to achieve greater cost reductions," a Microsoft spokesman said in a statement. It wasn't immediately clear how many positions would be impacted, or whether the agencies would pass on the pay cut to its employees.

A report in the Seattle Post-Intelligencer said the short-term contractors had been advised by Microsoft not to discuss the changes with their Microsoft managers, or to seek new assignments with the company. Microsoft didn't immediately comment on this.
In January Microsoft announced a major cost-cutting initiative - the first in the company's 30-year history. The company will cut 5,000 jobs over the next 18 months.

The job cuts, which comprise about 5.5% of the company's approximately 91,000-person workforce, included an initial round of around 1,400 layoffs.

Microsoft earlier this week gave a downbeat assessment of current macroeconomic conditions, saying sales of its core Windows operating system software were being hit by the slump in PC sales.

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