Tech Layoffs : Microsoft to Layoff 10,000 Employees

Tech Layoffs: Microsoft to Layoff — On Wednesday, Microsoft announced in a securities filing that it will be laying off 10,000 employees as part of its larger cost-cutting measures. This move makes Microsoft the latest tech company to reduce staff due to increasing economic uncertainty.

Before the layoff announcement, Microsoft CEO Satya Nadella spoke at the World Economic Forum (WEF) in Davos, Switzerland, and acknowledged that the company is not immune to the effects of a weaker global economy. Nadella stated “No one can defy gravity and gravity here is inflation-adjusted economic growth,” in a discussion with WEF founder Klaus Schwab that was livestreamed.

On Wednesday, in a memo to the employees, CEO Satya Nadella also mentioned the shift in demand for digital services during the pandemic and the concerns of an upcoming recession as reasons for the layoff.

“We’re living through times of significant change, and as I meet with customers and partners, a few things are clear,” he wrote. “First, 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.”

Microsoft, as of June 30th, 2022, had approximately 221,000 full-time employees worldwide, according to a US Securities and Exchange Commission filing, with 122,000 of those employees based in the United States. According to CEO Satya Nadella, the job cuts represent less than 5% of the company’s total workforce and the reductions will be completed by the end of its fiscal third quarter this year, which ends in March.

Nadella also mentioned that the company will incur a $1.2 billion charge in its second quarter related to “severance costs, changes to our hardware portfolio, and the cost of lease consolidation.” He said “These decisions are difficult, but necessary.”

Multiple tech companies have made deep cuts to their workforces since the start of the year, as inflation weighs on consumer spending and rising interest rates squeeze funding. The demand for digital services during the pandemic has also waned as people return to their offline lives.

Amazon (AMZN) announced that it plans to lay off 18,000 people, Salesforce said it is cutting 10% of its staff, Facebook (FB) parent Meta also recently announced 11,000 job cuts, the largest in the company’s history. In October, Axios reported that Microsoft had laid off under 1,000 employees across several divisions.

Tech CEOs, from Meta’s Mark Zuckerberg to Salesforce’s Marc Benioff, have blamed themselves for over-hiring early on in the pandemic and misreading how a surge in demand for their products would cool once Covid-19 restrictions eased.

While the overall labor market remains tight, layoffs in the tech sector have mounted at a staggering pace. A recent report from outplacement firm Challenger, Gray & Christmas found tech layoffs were up 649% in 2022 compared to the previous year, versus just a 13% uptick in job cuts in the overall economy during the same period.

Despite the cuts, Microsoft will continue to invest in “strategic areas for our future” and pointed to advances in AI as “the next major wave” of computing. Nadella’s letter to employees comes amid rumors of a significant investment from Microsoft into OpenAI, the firm behind the AI chatbot, ChatGPT.

Microsoft will announce its second-quarter earnings on January 24th, and according to the company, Azure cloud computing business drove revenue growth over the three months through September, as sales in its personal computing division decreased slightly.