Microsoft CEO Satya Nadella speaks at the company’s Ignite Spotlight event on November 15, 2022 in Seoul.
SeongJoon Cho | Bloomberg | Getty Images
Microsoft said Wednesday it would lay off 10,000 employees through March 31 as the software maker prepares for slower revenue growth. The company is also taking a $1.2 billion charge in the fiscal second quarter, which will result in a negative impact of 12 cents on adjusted earnings per share.
Alphabet, Amazon and Salesforce are among the tech companies that have cut staff in recent weeks. The drop comes after demand for cloud computing and collaboration services surged as companies, government agencies and schools encouraged remote work to reduce Covid exposure.
Rising prices have prompted companies to be more cautious about technology spending, hurting the outlook for technology stocks, which have outperformed other market sectors year over year. Now Microsoft and its competitors are taking stock. In July, Microsoft said it would cut less than 1% of its workforce, and in October it confirmed another round of job cuts that reportedly affected fewer than 1,000 workers.
“I’m confident that Microsoft will come out of it stronger and more competitive,” CEO Satya Nadella told employees in a memo posted on Microsoft’s website. The move will reduce Microsoft’s workforce by less than 5%, and some employees will find out this week if they will lose their jobs, he wrote.
Microsoft shares rose slightly after the announcement at the US Open.
Employees in the US who are eligible for benefits will receive six months of above-market severance pay, healthcare and a stock award. and 60 days in advance before her work ends, Nadella wrote.
Nadella reiterated trends in business sentiment that he has outlined over the past few months.
“Just as we’ve seen customers accelerate their digital spend during the pandemic, we’re now seeing them streamlining their digital spend to do more with less,” he wrote. “We are also seeing companies across all industries and geographies exercising caution as some parts of the world are in recession and other parts are anticipating a recession.”
Earlier this month Nadella had hinted that the company may need to make adjustments.
“I think we as a global company are not going to be immune to what’s happening in the macro,” he said in an interview with CNBC-TV18. “We also need to have our own kind of operational focus on making sure our spend aligns with our revenue growth.”
Microsoft has called for revenue growth of 2% for the fiscal second quarter, which would be the slowest rate since 2016.
Major layoffs aren’t an annual exercise for the 47-year-old Microsoft, but they do happen occasionally. In 2017, Microsoft laid off thousands of employees in a major reorganization of its sales unit. In 2014, after acquiring Nokia’s devices and services business, Microsoft cut 18,000 jobs.
The fee relates to severance payments, changes to the company’s hardware lineup and the cost of consolidating leases, Nadella wrote.
“Each of us and every team across the organization must raise the bar and outperform the competition to deliver meaningful innovation that can truly benefit customers, communities and countries,” Nadella wrote. “If we achieve this, we will come out stronger and thrive well into the future; as simple as that.”
LOOK AT: Microsoft’s OpenAI investment won’t help the company compete with Google search, says tech analyst
