Microsoft institutes hiring freeze

Microsoft has instituted a hiring freeze, likely spurred by the worsening economic conditions in the U.S., according to a source close to the company. (Update: Microsoft denies hiring freeze. Join in the discussion: Microsoft hiring freeze? From recession to depression ...)

On Friday, the software giant started sending a note to employees informing them of the decision, according to an employee who saw the letter but asked not to be named.

The move is a sign that the financial crisis in the U.S. is taking a toll on the IT sector. Analysts this week downgraded the stock and earnings expectations for a variety of IT vendors including Apple, Salesforce.com, Intel and AT&T. Some analysts say that the financial crisis is causing a credit crunch that will likely slow IT spending by both consumers and companies.

Microsoft has more than 91,000 employees worldwide, including more than 54,000 in the U.S. The software giant has seldom had layoffs or slowed down hiring in its more-than-30-year history.

The hiring freeze follows a trip to Europe this week by Microsoft's CEO Steve Ballmer during which he unveiled plans to hire additional engineers in Norway and other European locations to further the company's development of search technology. It's unclear what will happen to those projects.

Microsoft did not immediately reply to a request for comment. (Story is updated here with Microsoft's response.)

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