The January 18 timing corresponds with the date its retail and cloud-computing rival Amazon.com has said more employees will be notified in its own 18,000-person layoffs.
The cuts reflect broader belt-tightening in the technology sector. The CEO of another company serving enterprises, Palantir Technologies, this week told Reuters that reducing cloud spending was a top-ten priority of his customers.
More than 150,000 tech-company workers faced job cuts in 2022, according to tracking site Layoffs.fyi. Among them were 11,000 at Facebook’s parent Meta Platforms, representing the breadth of workforce reductions stretching beyond enterprise IT to ad-based business and the consumer internet.
Microsoft chief Satya Nadella told staff the company will “emerge stronger” as it adjusts to the changing tech landscape.Credit:Louie Douvis
Microsoft said it would take a billion-dollar charge from severance costs among other changes. US-eligible staff, for instance, will get healthcare coverage and stock vesting for six months.
The charge also regards adjustments to its hardware lineup and lease consolidation to build higher-density workspaces, Nadella said. Microsoft declined to detail the hardware changes or say if it would stop developing any product line.
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The Washington-based company has grappled with a slump in the personal-computer market after a pandemic boom fizzled out, leaving little demand for its Windows software and accompanying products.
In total, the charge, taking place in Microsoft’s second fiscal quarter this year, represents a negative impact of 12 cents per share of profit, the company said.
Wedbush Securities analyst Dan Ives said, “This is a rip the band-aid off moment to preserve margins and cut costs in a softer macro.”
Ascendant in recent years from an explosion in corporate demand to host data online and handle computing in the so-called cloud, Microsoft has taken a different tone in recent months.
In its first fiscal quarter of 2023, cloud growth dropped to 35 percent, and the company projected the figure to drop again. In July last year, it said a small number of roles had been eliminated.
Still, Nadella sought to assure employees on the future. Generative AI, as reflected by OpenAI’s ChatGPT that Microsoft will soon market through its cloud service, is pointing the road ahead.
“We are allocating both our capital and talent to areas of secular growth and long-term competitiveness for the company, he said. “We will emerge stronger.”
Reuters