Microsoft will shed 10,000 jobs and take a $1.7 billion ($US1.2 billion) hit in the face of reduced consumer spending and the threat of global recessions.
The tech giant is following in the footsteps of its peers in announcing significant job cuts in recent months, with the uptick in growth from the COVID-19 pandemic being turned on its head.
Microsoft CEO Satya Nadella confirmed the job cuts in a blog post on Thursday, titled “Focusing on our short and long-term opportunity”.
The tech giant is seeing its customers “optimise their digital spend to do more with less”, while several countries are experiencing recessions and the impacts of the next wave of computing in artificial intelligence is also being felt, Nadella said.
“This is the context in which we as a company must strive to deliver results on an ongoing basis, while investing in our long-term opportunity, but it requires us to take actions grounded in three priorities,” Nadella said in the blog post.
Because of this, Microsoft will be aligning its cost structure with revenue and customer demand and reducing its overall workforce by 10,000 jobs, about 5 percent of its total team, by the end the third quarter of the 2023 financial year, Nadella said.
“It’s important to note that while we are eliminating roles in some areas, we will continue to hire in key strategic areas,” he said.
“We know this is a challenging time for each person impacted. The senior leadership team and I are committed that as we go through this process, we will do so in the most thoughtful and transparent way possible.”
The company will also be divesting from some areas of its business and reallocating this money to areas of growth and competitive advantage. As a result of the severance packages, changes to its hardware portfolio and lease consolidations, Microsoft will be taking a $US1.2 billion charge in the second quarter.
It’s currently unclear which locations the 10,000 jobs will be cut from, and which of Microsoft’s worldwide offices may be closed.
Nadella said all employee benefits will align with the employment laws in each country, while US employees will receive an above-market severance package.
Microsoft has about 221,000 employees around the world, with more than 2000 of these based in Australia.
It’s a crucial year for Microsoft, and the tech sector in general, Nadella said.
“When I think about this moment in time, the start of 2023, it’s showtime – for our industry, and for Microsoft,” he said.
“As a company, our success must be aligned to the world’s success. That means every one of us and every team across the company must raise the bar and perform better than the competition to deliver meaningful innovation that customers, communities and countries can truly benefit from.
“If we deliver on this, we will emerge stronger and thrive long into the future; it’s as simple as that.”
A number of Microsoft’s peers have also made major job cuts in recent months.
Amazon will be cutting 18,000 jobs, the largest in the company’s history, mainly around its devices organisation, including its voice assistant Alexa.
Facebook parent company Meta will be shedding 11,000 people or 13 percent of its workforce, while Twitter has already slashed 4000 roles under new CEO Elon Musk.
Along with Microsoft, these four tech giants alone have cut about 43,000 jobs in the last three months.
According to layoffs.fyi, which tracks job losses, more than 120,000 employees were laid off across 795 tech companies last year.