Microsoft CEO Satya Nadella emailed employees this morning, confirming that the software giant will lay off 10,000 of them over the next two months.
“Today, we are making changes that will result in the reduction of our overall workforce by 10,000 jobs through the end of [March],” Nadella’s email to employees, which was obtained by GeekWire, reads. “This represents less than 5 percent of our total employee base, with some notifications happening today. It’s important to note that while we are eliminating roles in some areas, we will continue to hire in key strategic areas. 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.”
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Nadella also noted that Microsoft will take a $1.2 billion charge against earnings in the previous quarter, its second fiscal quarter, related to “severance costs, changes to [Microsoft’s] hardware portfolio, and the cost of lease consolidation as we create higher density across our workspaces.” So we will see that charge in the earnings announcement that Microsoft will make next week.
Nadella also spoke about areas of investment for the company, which should really cheer up those who are being let go. Microsoft, he said, was now “allocating both our capital and talent to areas of secular growth and long-term competitiveness for the company, while divesting in other areas.” I’m curious to see where they divest: that comment, combined with the previous note on “changes to [Microsoft’s] hardware portfolio,” has me wondering about Surface, especially, as it’s a high-cost, low-margin business that has never been profitable.
(UPDATE: This is almost certainly a reference to HoloLens, not Surface. –Paul)
Microsoft will treat its people with dignity and respect, Nadella added, and it will act transparently as it follows through on these difficult decisions. Full-time employees in the United States will receive “a variety of benefits, including above-market severance pay, continuing healthcare coverage for six months, continued vesting of stock awards for six months, career transition services, and 60 days’ notice prior to termination,” he says, while benefits for employees outside the U.S. will align with the employment laws in each country.
Microsoft somehow has over 221,000 employees now, and it has inflated its employee ranks dramatically in recent years. GeekWire notes, for example, that Microsoft hired 40,000 people in its 2022 fiscal year alone, up 22 percent over the prior year. The last time it laid off more employees was in 2014, right after Satya Nadella became CEO and started the process of killing Windows Phone: most of those 18,000 layoffs were former Nokia employees.