A proposed $500 million data center in West Des Moines has been placed on hold by Microsoft.

The company announced last fall that it would reduce capital expenditures by $300 million, but provided few details which of three planned data centers would be impacted. Yesterday the company released it’s second quarter earnings for fiscal year 2009 and announced several cost management initiatives that included placing 5,000 jobs on the chopping block.

In a blog post today, Microsoft management team members Arne Josefsberg and Michael Manos detail how improved efficiencies at other data centers have allowed the company to delay construction in Iowa.

“[W]e’re postponing construction of the data center in Iowa that we recently purchased land for,” the managers wrote. “We are still continuing construction of our facilities in Chicago and Dublin, [Ireland] and are planning to open them as customer demand warrants.”

The company plans to begin monitoring expansion and efficiency on a quarter-by-quarter basis. No mention was made as to the reasoning the Iowa construction project was placed aside in favor of the other two.

Rumors about a possible delay or reconsideration of the Iowa project began circulating in October — just two months after Gov. Chet Culver announced the Microsoft data center. The company issued a press release that noted the upcoming data centers in Chicago and Dublin without comment about the future of the Iowa project.

The decision by Microsoft to consider an Iowa location was made, at least in part, by a legislative incentive package that passed overwhelmingly in February 2008. The package provided the company a six-year tax exemption on purchases of computers, equipment and electricity.