On Wednesday, Microsoft announced that it will be letting go of 10,000 employees through March 31st as the company anticipates slower revenue growth. In addition, Microsoft will also be taking a $1.2 billion charge. This news comes as several other technology companies, such as Alphabet, Amazon, and Salesforce, have also recently reduced their headcount.
The contraction in the technology industry is a result of a shift in demand for cloud-computing and collaboration services, as the ongoing COVID-19 pandemic has led to an increase in remote work. This has also led to companies becoming more cautious about technology spending, which has negatively impacted the prospects for technology stocks that have consistently outperformed other market sectors in recent years.
Microsoft’s CEO, Satya Nadella, reassured employees in a memo that was posted on the company’s website, stating, “I’m confident that Microsoft will emerge from this stronger and more competitive.” The layoffs will reduce Microsoft’s headcount by less than 5%, and some employees will find out this week if they will be impacted.
Employees in the U.S. who are eligible for benefits will receive severance that is above the market, health care, and stock vesting for six months, as well as 60 days’ notice before their work ends. Nadella also pointed out that the business climate has shifted in recent months, with customers now looking to “optimize their digital spend to do more with less” and organizations in every industry and geography becoming more cautious as some parts of the world are in a recession and others are anticipating one.
This is not the first time that Microsoft has had to make significant layoffs. In 2017, the company laid off thousands of employees as part of a broad reorganization of its sales unit. In 2014, following the acquisition of Nokia’s devices and services business, Microsoft cut 18,000 people. However, it is worth noting that major layoffs are not an annual occurrence for Microsoft.
The charge that Microsoft is taking relates to severance, hardware, and the cost of lease consolidation. Nadella closed his memo by emphasizing the importance of innovation and performance, stating, “Every one of us and every team across the company must raise the bar and perform better than the competition to deliver meaningful innovation that customers, communities, and countries can truly benefit from.” If the company can deliver on this, Nadella believes that Microsoft will emerge stronger and continue to thrive in the future.
