Microsoft CEO Satya Nadella speaks at the company’s Ignite Spotlight event in Seoul on November 15, 2022.
Seong Joon Cho | Bloomberg | Getty Images
Microsoft said Wednesday it will lay off 10,000 employees through March 31 as the software maker braces for slower revenue growth. The company is also taking a $1.2 billion suit.
Alphabet, Amazonand Sales team are among the tech companies that have cut their workforce in recent weeks. The downsizing comes after demand for cloud computing and collaboration services picked up as companies, government agencies and schools encouraged remote working to reduce exposure to Covid.
Rising prices have prompted companies to become more cautious about technology spending, hurting the outlook for technology stocks that have outperformed other market sectors year over year. Now Microsoft and its colleagues are taking stock. In July, Microsoft said it had cut less than 1% of workers, and in October it confirmed another round of job cuts reportedly affecting fewer than 1,000 workers.
“I have every confidence that Microsoft will emerge from this stronger and more competitive,” CEO Satya Nadella announced the move in a memo to employees 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 lose their jobs, he wrote.
Microsoft shares rallied slightly higher at the US Open after the announcement.
Employees in the U.S. who qualify for benefits will receive severance pay that exceeds the market, health care and stock awards six months and 60 days before their work ends, Nadella wrote.
Nadella echoed the business climate trends he’s been describing in recent months.
“While we saw customers accelerate their digital spend during the pandemic, we are now seeing them optimize their digital spend to do more with less,” he wrote. “We also see organizations in every industry and region taking caution as some parts of the world are in recession and others are anticipating it.”
Earlier this month, Nadella indicated that the company may need to make adjustments.
“I think as a global company we will not be immune to what is happening in the macro,” he said in an interview with CNBC-TV18. “We’re also going to need to get our own operational focus to make sure our spending is in line with our revenue growth.”
Microsoft has called for 2% revenue growth in the fiscal second quarter, which would be the slowest pace since 2016.
Big layoffs aren’t an annual exercise for the 47-year-old Microsoft, but they do happen once in a while. In 2017, Microsoft laid off thousands of employees in a wide-ranging reorganization of its sales department. In 2014, after acquiring Nokia’s devices and services business, Microsoft laid off 18,000 people.
The charges cover layoffs, hardware and the cost of rent consolidation, Nadella wrote.
“Each of us and every team across the company must raise the bar and outperform the competition to deliver meaningful innovation that can truly benefit customers, communities and countries,” Nadella wrote. “If we deliver on this, we will emerge stronger and thrive well into the future; simple as that.”
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