Microsoft Announces Up to 10,000 Job Cuts, to Invest in Strategic Areas to Remain Competitive

Microsoft CEO Satya Nadella has announced up to 10,000 job cuts, with notices going out to affected employees as early as today. In a memo circulated to staff and published online, Nadella outlined the economic conditions that are forcing "hard choices" such as this, but stated that Microsoft will continue to invest in "strategic areas" for its future. The total number of employees to be laid off represent less than five percent of Microsoft's total workforce, according to Nadella. The layoffs were anticipated, with rumours leaking earlier today. As per reports, Microsoft had 221,000 employees as of June 2022, with 99,000 of those outside the US. Other large tech companies including Twitter, Amazon and Meta have also laid off significant numbers of employees recently thanks to a global economic downturn.

In the company-wide memo, Nadella cited reduced consumer spending as the COVID-19 pandemic has become less severe, and the fact that many parts of the world are facing economic recession. The layoffs are necessary to align cost structures with projected revenue, and Microsoft will continue to hire new resources where needed. While some affected employees will be notified immediately, the process is expected to be complete only by Q3 2023. 

Promising to treat all employees "with dignity and respect", and act transparently, Nadella committed to helping those laid off in terms of adequate notice periods, career transition services, continuing employment benefits, above-market severance pay, and stock option vesting, in accordance with laws and regulations in various countries. The cost of severance as well as consolidating leased office space is expected to be $1.2 billion this year. It was not immediately clear how many of the affected employees are in the US and how many work in other locations.

Even through this process, Microsoft says it will continue investing its money and people in key strategic areas for future growth, which are likely to involve AI. The memo ends with Nadella thanking all Microsoft employees for their dedication and resilience, but includes a warning that everyone must perform better for the company to thrive.