Microsoft confirmed in a filing with the Securities and Exchange Commission (SEC) today that 10,000 workers would be affected by “workforce reduction” actions the business is implementing in response to “macroeconomic circumstances and changing customer preferences.”
The announcement comes amid widespread layoffs in the IT sector; for example, Salesforce recently said it will reduce its employment by10%, affecting about 7,000 employees, while Amazon is now in the process of laying off 18,000 employees.
The new layoffs constitute a significant portion of Microsoft’s staff, roughly 5% of its 221,000 workers worldwide. While Microsoft did through at least a couple of smaller rounds of layoffs last year, these cuts were far less. The business also wants to combine some of its office leases in order to “create increased density throughout our workplaces,” which it says would occur between now and the end of Q3 2023.
Microsoft promised U.S.-based workers “above-market severance compensation,” but did not provide details about how much that may be. Additionally, it said that affected employees will continue to get health insurance for another six months, as well as career transition assistance and 60 days’ notice.
CEO Satya Nadella’s statements in an internal email letter were consistent with those of other technology businesses that have announced large-scale layoffs in the previous year. Customers boosted digital spending during the epidemic but are now cutting down, in part owing to the global economic crisis.
To “do more with less,” as Nadella put it, “customers are optimising their digital expenditure as we saw them accelerate it during the epidemic.” As certain regions of the globe experience a recession and others brace for one, “we are also seeing firms in every sector and area exercise prudence.”
Microsoft is eliminating certain positions, but the company still intends to expand its workforce in “critical strategic areas.”
According to Nadella, “we will continue to invest in key areas for our future, meaning that we are devoting both our cash and personnel to areas of secular development and long-term competitiveness for the firm,” while reducing investments in less promising sectors. As the CEO put it, “These are the types of hard decisions we have taken over our 47-year existence to stay a meaningful firm in this sector that is merciless to anybody who doesn’t adapt to platform developments.”
Microsoft has said that its cost-cutting actions, including severance compensation, modifications to its hardware portfolio, and “lease consolidation” activities, would cost the company around $1.2 billion in Q2.
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