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Originally published January 21, 2009 at 12:00 AM | Page modified January 21, 2009 at 11:46 AM

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Microsoft to delay starting new construction on Redmond campus

Microsoft is putting the brakes on its rapid facilities expansion in the Puget Sound area as the company navigates a bleak economy. An internal Microsoft plan...

Seattle Times technology reporter

Microsoft is putting the brakes on its rapid facilities expansion in the Puget Sound area as the company navigates a bleak economy.

An internal Microsoft plan calls for delays of certain construction projects. A source, who asked not to be named while discussing internal matters, provided The Seattle Times with details of the plan via e-mail and said it had been approved by Microsoft Chief Financial Office Chris Liddell in December.

The plan calls for a three-year delay before starting any new construction project on the Redmond campus, with the exception of one building. Projects already under construction, such as the major West Campus expansion first outlined in 2005 and nearing completion, will continue.

Microsoft spokesman Lou Gellos acknowledged construction delays but provided few specifics because the company is in a "quiet period" ahead of what will be a closely watched quarterly earnings report Thursday.

"Like any well-managed business, we routinely check our assumptions and planning needs against our assessment of the economic environment," Gellos said in a statement. "As part of this process, which we undertake quarterly, we look at many scenarios and options. ... In light of the economic situation, we will also delay some planned construction on the north part of our campus."

The plan mentioned buildings targeted for the former Safeco campus and a parcel of land adjacent to Nintendo of America's corporate headquarters. Microsoft acquired these and other parcels in the Overlake area to expand its headquarters campus.

According to the internal plan, new buildings will be postponed until at least 2013.

In October, Microsoft announced plans to trim $400 million to $500 million from its operating budget in the fiscal year that ends June 30. It will do so through slower hiring, reduced capital spending and cuts to travel budgets and vendor services.

At the same time, Microsoft lowered its forecast for sales and profit during the quarter ended Dec. 31. The company is expecting sales between $17.3 billion and $17.8 billion, and profit between 51 cents and 53 cents a share.

On average, Wall Street analysts expect results below the low end of those ranges, as PC sales growth — a key driver of Microsoft's main Windows business — came in at an anemic 1.1 percent in the fourth quarter, research firm Gartner said. Another researcher, IDC, actually recorded a 0.4 percent decline in sales.

While no widespread layoffs have been announced, Microsoft has dramatically slowed hiring and trimmed its contract work force. Other employees have said travel to conferences and events is being limited.

The company will allow some of its leases to expire as it brings the West Campus expansion on line. As of Oct. 31, Microsoft was leasing about 4.3 million square feet of space at 53 sites around Puget Sound.

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"I can confirm that as some leases expire, we will not renew them," Gellos said. "It was our plan all along to move the people in many of those buildings to the new construction that is nearing completion on campus and in Bellevue, and to our Westlake/Terry facility in Seattle."

Microsoft Entertainment and Devices Division President Robbie Bach said in a recent interview that he was looking forward to uniting his division, scattered among leased space in Redmond and elsewhere, on the main campus beginning this spring.

"The ability to get people together, having most of the team on one site will matter and will help us," he said.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

Copyright © 2009 The Seattle Times Company

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