Mass layoffs continue to wreak havoc at big tech companies. This Wednesday, it was Microsoft that joined the wave of staffing cuts at some giants that have thickened their payrolls during the pandemic, impacted by the slowing economy and lower growth in demand for their services. Microsoft has announced job cuts of 10,000 jobs, around 5% of its employees. “These decisions are difficult but necessary,” company CEO Satya Nadella said in a note to employees.
In a filing with the United States Securities and Exchange Commission (SEC), the company indicated that the workforce reductions will take place during the current fiscal quarter ending March 31 and that the action is part of a broader cost reduction plan.
Nadella begins the letter notifying employees of the layoffs: “We are living in times of significant change and when I meet with clients and partners, some things are clear. First, just as we’ve seen customers accelerate their digital spend during the pandemic, we’re now seeing them streamline their digital spend to do more with less.” are in a recession and others are at risk of falling into it.
Bad news comes in the third paragraph: “We will align our cost structure with our sales and customer demand. We are currently making changes that will result in a 10,000 reduction in our global workforce by the end of Q3 FY23 [el actual]. This is less than 5% of our total workforce and some reports have come in today,” he says.
“These are the kind of tough decisions we’ve made in our 47-year history to remain a vital company in an industry that doesn’t forgive those who don’t adapt to platform changes,” the executive added. Nadella qualifies that while the company is cutting jobs in some areas of its business, the company is hiring in key strategic areas, among which artificial intelligence stands out.
Microsoft’s President assures that the company will treat its employees “with dignity and respect”. “Employees who are eligible for benefits in the United States will receive a range of benefits, including above-market severance pay, six months of continued medical coverage, six months of continued vesting of claims, career transition services and a 60-day notice period , whether or not such notice is required by law. Benefits for employees outside of the United States are adjusted according to the labor laws of the respective country,” he explains.
Layoffs in the tech sector have gained momentum over the past year and will continue into 2023. The announcement by the Satya Nadella-led company coincides with the date Amazon will notify new hires that they are part of a record 18,000 job cuts initiated by e-commerce and the cloud computing giant. Microsoft is headquartered in Redmond, Washington, just outside of Seattle, where Amazon is also based.
As of June 30, 2022, the end of its most recent fiscal year, Microsoft had 221,000 full-time employees, 122,000 in the United States and another 99,000 abroad, according to its annual report. Those 221,000 employees represented an unprecedented 40,000 increase in the workforce for the company in a single year that the company choked on.
Of the total number of people employed by Microsoft at the end of its most recent fiscal year, 85,000 worked in operations, including manufacturing, sales, product support and consulting services; 73,000 worked in product research and development; 47,000 worked in sales and marketing; and 16,000 worked in general administration.
The company plans to report its fiscal second quarter results on January 24 and has announced it will allocate $1,200 million to its cost-cutting plan. In the first, from July to September, it achieved sales of $50,122 million, with a growth of 11%, the lowest in more than five years. The strength of the dollar cut growth by five percentage points, which would have been 16% at constant exchange rates. But the company saw margins deteriorate. Operating income grew 6% and net income declined 14%, impacted by special items and foreign exchange effects.
wave of layoffs
The wave of layoffs at tech companies created more than 150,000 jobs last year, according to calculations by website layoffs.fyi, which calculates announcements and news about them. For many tech companies, the pandemic has been a golden age. The return to normal, failures in strategy, excessive hiring and the slowdown in the economy have left a hangover of tens of thousands of layoffs in the industry, despite the strength of the US job market, which has seen the lowest unemployment rate in the last 50 years.
So far in 2023, Amazon has announced that it will increase its workforce reductions to a total of 18,000 employees, which is just over 1% of its workforce of 1.5 million workers. Salesforce joined a restructuring plan to cut about 10% of its workforce, meaning about 8,000 layoffs, to cut costs and improve operating margins, the United States Securities and Exchange Commission (SEC) reported.
Along with Amazon, Meta (Facebook) is among the companies to have announced job cuts over the past year, with 11,000 layoffs, partly due to losses resulting from the failed bid for the Metaverse. Twitter halved its workforce of 7,500 with the arrival of Elon Musk, followed by a wave of layoffs of hundreds of employees. Social network Snap announced in August that it was laying off 20% of its payroll, more than 1,000 workers, after a slowdown in its growth and millions of dollars in losses. Connected exercise bike maker Peloton joined in October with more than 4,000 employees and Netflix with about 500.
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