Microsoft Cuts Thousands of Jobs in a Major Restructuring!

Microsoft announced its plans to cut 10,000 jobs as part of broader cost-cutting efforts on Wednesday, becoming the latest tech company to do so in response to the deteriorating state of the economy.

Microsoft CEO Satya Nadella remarked that the corporation was not immune to a weakening global economy on Wednesday before the World Economic Forum (WEF) in Davos, Switzerland, announced the layoffs.

During a live discussion, he said to WEF founder Klaus Schwab: “No one can defy gravity, and gravity here is inflation-adjusted economic growth.” Nadella also referenced shifting demand years into the pandemic for digital services in a memo to employees on Wednesday, along with concerns about an impending recession.

We’re going through a lot of change right now, and from talking to consumers and partners, he wrote that a few things are becoming evident. “First, we’re seeing clients optimize their digital investment to achieve more with less, just as we saw them accelerate it during the epidemic,” the author said.

Microsoft Cuts Thousands of Jobs in a Major Restructuring
Microsoft Cuts Thousands of Jobs in a Major Restructuring

According to a US Securities and Exchange Commission filing, Microsoft had over 221,000 full-time employees worldwide as of June 30, 2022, with about 122,000 employees in the US.

Microsoft Announces Job Cuts Due To Changing Demand And Recession Fears

According to Nadella, the job losses will total fewer than 5% of the company’s overall employment and be finished by the end of the third quarter of this year’s fiscal year, which ends in March.

He claimed that a $1.2 billion charge for “severance charges, changes to our hardware portfolio, and the cost of lease consolidation” will be made by the corporation in the second quarter. “These decisions are difficult, but necessary,” Nadella wrote.

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Since the beginning of the year, several software companies have drastically reduced the size of their workforces as rising interest rates and consumer spending are both negatively impacted by inflation.

As individuals transition back to their offline lifestyles, the demand for digital services during the epidemic has also decreased. Amazon (AMZN) revealed intentions to fire 18,000 employees, and Salesforce indicated it would be laying off 10% of its workforce.

The most significant employment cuts in business history were recently disclosed by Facebook (FB) parent company Meta, which also eliminated 11,000 jobs. Axios reported in October that Microsoft had terminated less than 1,000 employees across various divisions.

CEOs of tech companies, including Marc Benioff of Salesforce and Mark Zuckerberg of Meta, have blamed themselves for overstaffing during the early stages of the pandemic and for failing to predict the spike in demand for their products would subside once Covid-19 restrictions were lifted.

While there is still a tight job market generally, the rate of layoffs in the IT industry is startling. According to a recent analysis from the outplacement agency Challenger, Gray & Christmas, tech layoffs increased 649% in 2022 compared to the prior year, while job losses in the broader economy increased by just 13% during the same period.

On January 24, Microsoft will release its second quarter financial results. Sales in the software company’s personal computer sector marginally declined over the three months ending in September, while its Azure cloud computing branch drove revenue growth during that time.

Nadella stated that despite making significant cuts, Microsoft would continue to invest in “important areas for our future” and identified developments in artificial intelligence as “the next great wave” of computing.

His message to the staff was published amid speculation that Microsoft will make a substantial investment in OpenAI, the company that created the AI chatbot ChatGPT.

Final Lines

In the most recent round of significant layoffs to hit the computer sector, Microsoft said on Wednesday that it is eliminating 10,000 employees, or just less than 5% of its whole staff.

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