The tech giant is the latest to make workforce cuts following similar announcements in recent months by Amazon, Meta, Cisco, Salesforce and Twitter.
Microsoft said Wednesday that it will lay off 10,000 employees to cut costs during uncertain economic times. CEO Satya Nadella said the cuts represent less than 5% of the company’s total workforce; he also said that Microsoft will focus on AI as a strategic priority.
“As we saw customers accelerate their digital spend during the pandemic, now we see them optimize their digital spend to do more with less,” Nadella told staff. “We are also seeing organizations across industries and geographies exercise caution as some parts of the world are in a recession and other parts anticipate one.”
WATCH: Checklist: Employee Termination (Tech Republic Premium)
The layoffs, the company’s biggest in several years, will continue through March. Microsoft had about 221,000 workers in June 2022 before laying off about 200 workers in August. The company shed some 25,000 jobs during 2014 and 2015 after it bought and then sold Nokia after a failed attempt to develop a Windows Phone as a third alternative to the iPhone and Android.
Job cuts follow platform realignments
“These are the kinds of tough decisions we’ve made over our 47-year history to remain a significant company in this industry that doesn’t forgive anyone who doesn’t adapt to platform changes,” Nadella said.
Microsoft will align its cost structure with its revenue and customer demand, he continued.
The company is reportedly planning to invest $10 billion to add OpenAI’s ChatGPT to its Azure service. Microsoft was one of the early sponsors of OpenAI.
WATCH: Artificial Intelligence Ethics Policy (Tech Republic Premium)
Microsoft will make changes that include severance payments and restructuring expenses at a cost of $1.2 billion, Nadella said. Some of the costs will come from consolidating office leases, as well as “changes in our hardware portfolio,” she said.
Layoffs are a worrying trend in a recession
With Microsoft’s planned reductions, there are now 19,150 job cuts announced by companies in the technology sector from January 1, 2023 to January 18, 2023, according to global relocation and executive and business coaching firm Challenger, Gray & Christmas, Inc.
“The technology sector is undergoing significant changes as a result of recession fears,” said Andrew Challenger, labor expert and senior vice president at Challenger, Gray & Christmas. “As with other more established sectors, the technology is maturing and that typically leads to workforce reductions as companies shift focus. With the weakening of the economy, those cuts become even more necessary and, in some cases, bigger.
Challenger went on to point out that these cuts have not been seen since the dot-com crash in the early 2000s. The 97,171 cuts in tech jobs in 2022 were the highest for the sector since 2002, when 131,294 cuts were announced, according to the firm. The highest total came in 2001, when 168,395 cuts were announced in the technology sector. Since November, tech companies have announced 88,114 job cuts, according to the firm.
Tech companies brace for slowdown
Earlier this month, Nadella raised concerns about the growth of the tech sector, saying he should be prepared for two more bumpy years.
Also this month, Salesforce announced plans to reduce its workforce by 10% (approximately 7,000 employees) and close some of its offices. Amazon has said it will cut 18,000 jobs starting next week, representing about 6% of the company’s total workforce of 300,000. Other tech companies that have laid off staff include Meta, Cisco and Twitter.
Tech companies have announced 88,114 job cuts since November, including those at Meta, Amazon and Twitter, Challenger, Gray and Christmas reported. This month’s partial total is the second-highest monthly total for the industry since September 2015, when 32,500 cuts were announced in a major restructuring of Hewlett-Packard. The highest monthly total on record occurred in November 2022 when 52,771 technology job cuts were announced, the firm said.