The job cuts at Microsoft are less than 5 percent of its 221,000-person workforce. Some of the affected employees will be notified as early as Wednesday, the company said.
“These are the tough choices we’ve made in our 47-year history to remain a sustainable company in this industry,” Microsoft CEO Satya Nadella said in a statement. Employees posted on the company blog.
Microsoft has expanded rapidly during the pandemic, adding 77,000 workers from 2019 workforce levels, according to regulatory filings. As the market for cloud computing services heats up quickly, it keeps up with other big tech companies involved in intense competition for talent.
The company’s layoffs are the biggest in several years. Microsoft shed 25,000 jobs between 2014 and 2015 after cutting the mobile phone operations it acquired from Nokia and focusing mostly on cloud computing, business software, some hardware products and games.
Nadella told employees Wednesday that Microsoft will “continue to invest in strategic areas for our future … as we dive into other areas.” The company has invested in artificial intelligence in recent months, including an investment in the creator of the viral ChatGPIT system. In December, Microsoft announced plans to fight federal regulators to complete its acquisition of video game company Activision Blizzard.
In Microsoft’s regulatory filing, it said it plans to cut costs through changes to its hardware portfolio — the company makes Surface tablets and other gadgets — and consolidate leased office space. The latest spending on the activities is expected to be $1.2 billion in the second quarter of fiscal year 2023, which ends in December.
“The technology industry in general, and especially those focused on software and intellectual property such as Microsoft, are facing significant macroeconomic pressures from the predicted economic slowdown and especially rapid interest rates,” said Josh White, assistant professor of finance. at Vanderbilt University. “A large part of their value is based on intellectual property, not physical. All companies will want to employ cost-saving measures in the coming year, but for these companies that rely on IP, cost reduction will unfortunately mean layoffs.
Few of the companies are laying off workers.
Layoffs continue to rage in the tech sector, with an average of 1,600 workers losing their jobs every day by 2023, according to Layoffs.fyi.
Amazon will begin a new round of layoffs on Wednesday as the company looks to trim its headcount by more than 18,000 in what is expected to be the largest round of layoffs in the company’s history. Salesforce, one of the most high-profile makers of cloud software for businesses; It recently cut its headcount by 10 percent, or about 8,000 jobs. Others, like Apple, have stopped layoffs while implementing hiring freezes.
Finances have been hit hard, with crypto companies and banking giants like Goldman Sachs cutting thousands of positions and reassessing costs ranging from bonuses to private jets.
CEOs at the forefront of downsizing, such as Tesla and Twitter’s Elon Musk, Salesforce’s Marc Benioff and Meta’s Mark Zuckerberg, have called on underperformers to slow down productivity and ask workers to do more.