Positions within the R&D, marketing, sales, finance, legal, HR and IT departments will be axed. Up to 1,400 employees will lose their jobs today.
Steve Ballmer, chief executive at Microsoft, 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.
"We will continue to manage expenses and invest in long-term opportunities to deliver value to customers and shareholders, and we will emerge an even stronger industry leader than we are today."
Microsoft said cost cutting initiatives, including a reduction in marketing, will reduce the company's annual operating expense run rate by about $1.5bn (£1.1bn).
The company reported revenues of $16.6bn (£12.1bn) during the second quarter, an increase of 2% over the same period the year before.
Chris Liddell, chief financial officer at Microsoft, said: "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.
"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."