Microsoft to reduce costs with layoffs of 10,000 employees

Microsoft announced on Wednesday it will lay off 10,000 employees. The company said it is part of the plan to trim costs which will affect nearly 5% of its total employees of 221,000.

In October, the tech giant already announced layoffs cutting 1000 jobs. Then the company laid off almost 1% of its workforce in July, while in May, Microsoft announced it would slow down hirings in its Teams, Windows, and Office divisions.

With these layoffs, Micorosft is the latest tech company to withdraw after a few years of hiring. It occurred during the pandemic surge in online services and the widening of cloud computing. The expansion made a tight competition for tech talents too.

Exactly one year after announcing their intention to buy Activision Blizzard for $68 billion, Microsoft today announced they are laying off 10,000 employees.

In comparison, Activision Blizzard has over 10,000 employees. pic.twitter.com/qt8FJKukur

— CharlieIntel (@charlieINTEL) January 18, 2023

Similar to other companies like Amazon, Microsoft also hired rapidly during the pandemic. It has hired over 75,000 workers since 2019. The company’s yearly revenue increased by 58% in three years. However, the growing interest rates and the threat of recession have altered the company’s plans. 

Microsoft CEO Satya Nadella cited, “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.”

Nadella also said, “These are the kinds of hard choices we have made throughout our 47-year history to remain a consequential company in this industry that is unforgiving to anyone who doesn’t adapt to platform shifts.”

Microsoft has laid off 878 workers at the company's Redmond HQ today, according to a Washington state WARN Act filing pic.twitter.com/6EEiiY4hNs

— Tom Warren (@tomwarren) January 18, 2023

The layoffs will start on Wednesday and will continue until March. By record, it is the tech giant’s largest cutoff in almost eight years. In 2014 and 2015, Nadella reduced roughly 25,000 jobs. This happened when Microsoft left its deal to purchase Nokia. 

Microsoft’s future plans

Nadella said that customers are looking “to do more with less.” He continued, “We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession, and other parts are anticipating one.”

The Microsoft CEO also said that the changes would include other restructuring expenses and severance, which will cost $1.2 billion. According to a regulatory filing, Microsoft specified that some of the costs would come from creating “changes to our hardware portfolio” and office leases. 

On a positive note, Nadella confirmed that Microsoft would continue to hire in other strategic areas. The company had also placed advances in artificial intelligence, which according o him, is “the next major wave of computing.”

Microsoft is also seeking to put worthwhile investments, including possibly investing $10 billion in Open AI. It owns the recently popular ChatGPT. In addition, Microsoft might also pursue Activision’s acquisition worth $69 billion. Activision is currently facing antitrust issues globally.