Microsoft joins Twitter, Amazon, Salesforce, others to layoff employees. The company is laying off about 10,000 staff members.
Microsoft has begun sending sack notifications to about 10,000 staff members who will not be working with the company from the Q3 of 2023.
In a statement confirming the laying off of about 4.5% of its global workforce, Microsoft said some of the employees had started getting their sack notifications from 18th of January, 2023.
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Describing the layoff plan, Microsoft said in its Securities and Exchange Commission filing that the move is in “response to macroeconomic conditions and changing customer priorities.”
The technology company has a global employee base of about 221, 000. Therefore, laying off 10,000 of that workforce means it would be letting go of about 4.5% of its workforce.
CEO Writes Employees:
In a mail to all employees, Microsoft‘s CEO, Satya Nadella, said many employees in the engineering division will be affected.
He added saying, “As we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less.”
A Bloomberg reported cited unnamed “people familiar with the matter,” noting that other employees to go would be from Microsoft’s mixed reality division, which makes the HoloLens and HoloLens-based gear.
The US Army is currently testing the HoloLens and HoloLens-based gear.
Microsoft grew its employees base from 135,000 in 2019 and to 221,000 as at January, 2023. In 2022, it had increased its staff strength to about 190,000 from the 166,000 it had in 2021.
Why Microsoft employed about 86,000 more employees just between 2019 and 2023:
Microsoft began to employ more staff members following increase in consumer spending on tech.
The increase resulted from the impact of the Covid-19 lockdowns which increased consumers’ interests for at-home entertainments and work-from-home tech needs.
Demand for PCs and other software grew exponentially.
However, after the easing of the lockdowns, consumer spending dwindled drastically, leading to poor PC sales.
In the Q4 of 2022, PC sales decreased by about 28–29 percent in comparison to Q4 PC sales during 2021.
In an interview, Nadella confirmed the poor sales saying “during the pandemic, there was rapid acceleration.
“I think we’re going to go through a phase today where there is some amount of normalization in demand.”
Responding to interview questions at the World Economic Forum in Davos, Switzerland, Nadella said “We will have to do more with less. We will have to show our own productivity gains with our own technology.”
Bloomberg, pointing to a slowing cloud computing business, noted that Microsoft is expected to post its smallest quarterly revenue gain, 2 percent, since fiscal year 2017 on January 24.
Nadella’s note to employees said Microsoft would continue hiring new workers in key growth areas, “meaning we are allocating both our capital and talent to areas of secular growth and long-term competitiveness for the company, while divesting in other areas.”
Microsoft to invest $10b into OpenAI’s ChatGPT:
Microsoft is partnering with developer OpenAI and acquiring Nuance, with speculations that it wants to integrate ChatGPT to its Edge browser.
In addition, it is investing in cloud services with recurring revenue, Bloomberg said. Microsoft also has eyes on gaming with its $68.7 billion Activision Blizzard acquisition.
This is the third round of layoffs at Microsoft we’ve seen since July 2022, when Bloomberg reported layoffs in various departments, including customer and partner solutions and consulting.
In August, another round reportedly targeted an unspecified number of workers in Microsoft’s R&D-focused Modern Life Experiences department.
According to Bloomberg, those two rounds of layoffs affected less than 1 percent of Microsoft’s workforce.
However, Microsoft’s job cuts are just a piece of what the tech industry has been seeing since consumer spending on tech has dropped.
Earlier this month, Amazon boosted its layoff count to 18,000, and Salesforce CEO Marc Benioff admitted his company hired “too many people” while cutting 10 percent of workers earlier this month. In November, HP announced 6,000 job cuts, Meta let go of more than 11,000 workers, and Tesla announced a 10 percent workforce reduction in June.
Laid-off workers in the US will receive 60 days’ notice, severance pay, and healthcare and vesting of stock awards for six months, as well as unspecified “career transition services,” Nadella’s email said.
While expecting long-term savings, Microsoft said the severance payouts, lease consolidation, and changes to its hardware portfolio would cost it about $1.2 billion in Q2 of the 2023 fiscal year.
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