Microsoft__A company may lay off employees for a variety of reasons. Financial difficulties, changes in the company’s industry or market, a shift in the company’s business strategy, or a lack of work or projects are all common reasons. Layoffs can also be caused by mergers, afcquisitions, or downsizing. Layoffs may be used in some cases as a cost-cutting measure to help a company become more financially stable or competitive.
Microsoft became the latest in a growing list of large technology companies to lay off workers due to economic concerns and overhiring during the pandemic on Wednesday.
Microsoft CEO Satya Nadella said Wednesday that the company plans to lay off 10,000 workers in order to cut costs amid economic uncertainty and refocus on strategic priorities such as artificial intelligence.
Microsoft employed approximately 221,000 people as of the end of June, and the layoffs represent less than 5% of its global workforce.
Microsoft is the latest tech behemoth to scale back after a few years of frenetic hiring, when a pandemic-fueled surge in online services and the expansion of cloud computing created fierce competition for tech talent.
Microsoft and its competitors responded to rising customer demand and a talent shortage by essentially stockpiling technical talent. “The reality is that you can adjust hiring very quickly, and that is what is happening,” said Brad Reback, an analyst at Stifel. “I don’t believe this is a symptom of a larger problem. This is more in the nature of normalisation.”
Many executives in the technology industry still make more money than executives in other industries could only dream of. Microsoft reported $50 billion in sales and $17.6 billion in profit in the most recent quarter.
On Wednesday morning, Microsoft’s stock was down more than 1%.In a message to employees, Mr. Nadella stated that the layoffs “are the kinds of difficult choices we have made throughout our 47-year history to remain a significant company in this industry that is unforgiving to anyone who does not adapt to platform shifts.”
The layoffs, which will begin on Wednesday and last until March, are the most significant in roughly eight years. Mr. Nadella cut approximately 25,000 jobs between 2014 and 2015 as Microsoft abandoned its doomed acquisition of Nokia.
Microsoft, like other tech companies, grew rapidly during the pandemic, hiring more than 75,000 people since 2019. Over the last three years, Microsoft’s annual revenue has increased by 58 percent, but rising interest rates and the prospect of a recession have dampened the company’s outlook. It reported its slowest growth in five years in the October quarter and warned that more mediocre results could follow.
Customers want to “do more with less,” according to Mr. Nadella. “We’re also seeing organisations in every industry and geography exercise caution, as some parts of the world are in recession and others are preparing for one,” he added.
Mr. Nadella estimated that the changes, including severance and other restructuring costs, will cost $1.2 billion. Microsoft stated in a regulatory filing that some of the costs would be borne by consolidating office leases as well as “changes to our hardware portfolio.” Microsoft manufactures the Surface line of laptops and tablets, and demand for personal computers has plummeted from pandemic highs, when businesses and families purchased laptops to work and study from home.
Amy Hood, the company’s finance chief, told investors in October that the slowdown in consumer PC sales that began in September would last until at least June.
On Tuesday, Microsoft will report its quarterly earnings.
Mr. Nadella stated that the company will continue to hire in strategic areas and referred to advances in artificial intelligence as the “next major wave of computing.”
The company has been pursuing several costly bets, including a potential $10 billion investment in OpenAI, which makes the massively popular ChatGPT artificial intelligence system, and a $69 billion acquisition of video game maker Activision, which is facing antitrust challenges around the world.
After several years of breakneck expansion, other tech behemoths have also begun to cut costs. On Wednesday, Amazon began what is expected to be a massive round of layoffs as part of its plans to reduce its corporate workforce by approximately 18,000 jobs.
“The exit from Covid this past year was challenging,” Doug Harrington, Amazon’s retail and operations chief, wrote in a message to employees obtained on Wednesday morning.
He continued, “we’ve determined that we need to take further steps to improve our cost structure so we can keep investing in the customer experience that attracts customers to Amazon and grows our business.”
Salesforce announced this month that it would lay off 10% of its workforce, or approximately 8,000 employees, and Meta, Facebook’s parent company, announced at the end of last year that it would cut more than 11,000 jobs.