Microsoft lays off 10,000 employees

Microsoft CEO Satya Nadella speaks at the company’s Ignite Spotlight event in Seoul on November 2. 15, 2022.

Seong Joon Cho | Bloomberg | Getty Images

Microsoft said Wednesday it was laying off 10,000 employees through March 31 as the software maker braces for slower revenue growth. The company is also taking a $1.2 billion charge.

Alphabet, Amazonand Selling power are among the tech companies that have downsized in recent weeks. The contraction comes after demand for cloud computing and collaboration services picked up as businesses, government agencies and schools encouraged remote working to reduce exposure to Covid.

Rising prices prompted companies to become more cautious about technology spending, hurting the outlook for tech stocks that have outperformed other market sectors year after year. Now Microsoft and its peers are taking stock. In July, Microsoft said it laid off less than 1% of employees, and in October it confirmed another round of job cuts that would have affected fewer than 1,000 workers.

“I’m confident that Microsoft will emerge stronger and more competitive,” CEO Satya Nadella said in a note to employees posted on Microsoft’s website. The move will reduce Microsoft’s workforce by less than 5%, and some employees will find out this week if they lose their jobs, he wrote.

Microsoft shares rose slightly at the US Open after the announcement.

Employees in the United States who are eligible for benefits will receive above-market severance pay, health care and vested stock for six months and 60 days notice before termination, Nadella wrote.

Nadella reiterated the business climate trends he has described in recent months.

“If we’ve seen customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less,” he wrote. “We are also seeing organizations across all sectors and regions treading cautiously as some parts of the world are in recession and others are anticipating one.”

Earlier this month, Nadella indicated that the company may need to make adjustments.

“I think for us, as a global company, we won’t be immune to what’s happening in the macro,” he said in an interview with CNBC-TV18. “We’ll also need to get our own kind of operational focus to make sure our spending is in line with our revenue growth.”

Microsoft called for revenue growth of 2% in the fiscal second quarter, which would be the slowest rate since 2016.

Major layoffs aren’t an annual exercise for the 47-year-old Microsoft, but they happen occasionally. In 2017, Microsoft laid off thousands of employees as part of a massive reorganization of its sales unit. In 2014, following the acquisition of Nokia’s devices and services business, Microsoft laid off 18,000 people.

The charge is for severance, equipment and the cost of consolidating leases, Nadella wrote.

“Each of us and every team across the company must raise the bar and outperform the competition to deliver meaningful innovation that customers, communities and countries can truly benefit from,” Nadella wrote. “If we achieve this, we will emerge stronger and prosper long into the future; it’s as simple as that.”

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