The layoffs at Microsoft amount to less than 5 percent of its 221,000-person workforce. Some of the affected workers will be notified as soon as Wednesday, the company said.
“These are the kinds of hard choices we have made throughout our 47-year history to remain a consequential company in this industry that is unforgiving to anyone who doesn’t adapt to platform shifts,” said Microsoft chief executive Satya Nadella in a note to staff that was published on the company’s blog.
Microsoft expanded rapidly during the pandemic, adding 77,000 employees from 2019 staffing levels, according to regulatory filings. That tracks with other big-tech firms that engaged in a fierce competition for talent, as the market for cloud computing services rapidly heated up.
The company’s retrenchment is its largest in several years. Microsoft slashed 25,000 jobs between 2014 and 2015 after shedding the mobile phone operations acquired from Nokia and largely focusing on cloud computing, business software, certain hardware products and gaming.
Nadella told employees Wednesday that Microsoft would “continue to invest in strategic areas for our future … while divesting in other areas.” The company in recent months has poured money into artificial intelligence, including an investment in the maker of the viral ChatGPT system. In December, Microsoft announced plans to fight federal regulators to finalize its acquisition of video game company Activision Blizzard, a risky bet that exposes major regulatory liabilities, but with considerable economic upside.
In a regulatory filing, Microsoft said it planned to cut costs through changes in its hardware portfolio — the company makes Surface tablets and other gadgets — and consolidating leased office space. The near-term cost of the moves is expected to be $1.2 billion in its fiscal 2023 second quarter, which ends in December.
“The tech industry in general, and especially those focused highly on software and intellectual property like Microsoft, are facing especially strong macroeconomic pressure from the forecasted economic slowdown and especially the rapid rise in interest rates,” said Josh White, an assistant professor of finance at Vanderbilt University. “A large portion of their value is based on intellectual property rather than physical equipment. All companies will be looking to employ cost-cutting measures over the coming year, but for these companies that rely on IP, cost-cutting unfortunately means layoffs.”
Job cuts have been tearing through the tech sphere, with an average of 1,600 workers in the space losing their jobs each day in 2023 so far, according to Layoffs.fyi.
Amazon is kicking off a fresh round of cuts on Wednesday as the company looks to trim its head count by more than 18,000, in what is projected to be the biggest round of cuts in the company’s history. Salesforce, one of the most high-profile makers of cloud software for businesses, recently reduced its head count by 10 percent, or nearly 8,000 jobs. Others, like Apple, have held off on layoffs while implementing a hiring freeze.
Finance has also been hard-hit, with crypto companies and banking giants like Goldman Sachs slashing thousands of positions and reevaluating expenses, from bonuses to private jets.
In the lead-up to cutbacks, CEOs such as Tesla and Twitter’s Elon Musk, Salesforce’s Marc Benioff and Meta’s Mark Zuckerberg had been publicly calling out low performers for waning productivity and asking workers to do more.
