Microsoft has confirmed the dismissal of 10,000 of its employeeswhich is about a 5% of your staff total, which exceeds 220,000 employees. Its CEO, Satya Nadellahas alluded to the need to align the company’s cost structure with its income, as well as with the forecasts it has of customer demand, in a statement that it has sent to all its employees.
The layoffs, which will apparently affect all divisions of the company, including the one in charge of Microsoft Azure, will take place from this week until the end of next March. In addition, the company will reserve 1,200 million in the second quarter of its fiscal year, which has just ended and whose results will be presented next week.
This amount will go toseverance pay costs«. Also to «cost of consolidating office leases, as we are going to create more density in our workspaces“, which indicates that they are going to close offices. They also point to changes in the hardware product portfolio. Microsoft is going to “direct both capital and talent to areas of typical growth and long-term competitiveness for the company, while divesting from other divisions«.
In addition to alluding to the difficulty involved in making the decision to lay off employees, Nadella has assured that the layoffs will be carried out “treating people with dignity and respect, and acting with transparency«. The manager added that the company is committed “to ensure that all those whose position is to be eliminated have full support during the transition«.
Severance pay will be different depending on each country, and «Employees who qualify for US benefits will receive a number of benefits, including above-market severance pay, health insurance coverage for six months, their stock rights will continue for an additional six months, career transition services, and a notice of layoff 60 days before it becomes effective, regardless of whether or not such notice is required by law. Compensation for employees outside the United States will be made in a manner that complies with the employment laws of each country«.
The company has already begun layoffs, which at least in its Washington state offices (Redmond, Bellevue and Issaquah), amount to 878 positions so far, according to a communication sent to the Washington Department of employment security.
This is the second largest round of layoffs in Microsoft history, which in 2014 laid off 18,000 workers, several months after Nadella became its CEO. So most of the layoffs took place at Nokia’s Devices and Services division, which the company had bought when Steve Ballmer was its top manager.
The pandemic caused many business customers of many technology companies, including Microsoft, to significantly increase their technology spending. For this reason, Microsoft, like other companies, grew remarkably to meet the demand. So much so that it hired 40,000 workers in its 2022 fiscal year alone, which ended last June.
About 45% of these positions, 18,000, were employees related to operations, an area that as a consequence outnumbered product research and development. This is reflected in the annual report sent to the United States Securities and Exchange Commission. However, much of this increase came through purchases. Among them, that of Nuance Communications, with which it gained 6,500 employees; and Xandr’s, which made him add 1,500.
Despite these layoffs, Microsoft has stated its intention to continue hiring. Of course, as can be deduced from the intentions communicated for its different divisions, it will do so for the areas that have the most projection for their future.
Nadella calls for more efficiency from technology companies in Davos
As the layoffs at Microsoft were being confirmed, Satya Nadella was participating in the World Economic Forum in Davos, in Switzerlandwhere according to Bloomberg it has indicated that the technology industry must learn to be efficient, as the demand from companies and consumers slows down.
Nadella has recalled that «during the pandemic there was a rapid acceleration. I think we are going through a phase right now where there is some normalization of demand. We will have to do more with less, and we have yet to show how our own productivity improves with our new technology.«.
Of course, the manager also foresees that investment in technology will accelerate after the current economic cycle, and has pointed to certain technologies, such as Artificial Intelligence, as likely drivers of growth. Of course, he has stressed that many companies have a «productivity paranoia» with respect to its employees, ensuring that «all leaders believe that they are somehow not being productive, but everyone in the organization feels burned out«.
Photo Satya Nadella: World Economic Forum
