The unprecedented layoffs and other cutbacks announced yesterday by Microsoft haven't appeased Wall Street. Microsoft shares are down more than 6 percent since the news came out, and some analysts assert that the company needed to go much further.

"We believe the negative stock reaction may have had more to do with a head-fake regarding expense control than the weak results," JP Morgan analyst John DiFucci wrote. "Management discussed the need to concentrate on running the organization more efficiently through expense reductions, but net/net, there were none. Operating expenses will increase in the second half from a year ago."

That sentiment was echoed by Sid Parakh, an analyst with McAdams Wright Ragen in Seattle. The company does expect to cut operating expenses (excluding cost of goods) this fiscal year by $1.5 billion from its previous plan. However, Parakh noted that its estimated fiscal year operating expenses of $27.4 billion mean that second-half spending will be more than $14 billion -- up from the roughly $13 billion in operating expenses reported by the company in the first half of the fiscal year.

"While the cost cuts are prudent and required, they do not appear to go far enough, we believe," Parakh wrote in a report.

He noted that the company announced layoffs "up to" 5,000 people over the next 18 months, which means it could be less than that amount. Microsoft said yesterday that it will make 1,400 job cuts immediately. About 870 of those initial job cuts will be in the Seattle region, according to a filing the company made with the state Employment Security Department.

The numbers don't count the company's contract work force, which is expected to be significantly reduced, as well.

But Microsoft says it will also keep hiring in some areas, such as Internet search, resulting in a net loss of direct employment of 2,000 to 3,000 employees worldwide over the next 18 months. As we noted yesterday, that will take the company back to the employment level it saw in July of last year.