Microsoft and its peers responded to booming customer demand and the talent race by essentially hoarding technical staff. “The reality is you can adjust hiring very quickly, and that is what is going on,” said Brad Reback, an analyst at the investment bank Stifel. “I don’t think this is symptomatic of a bigger issue. This is more along the lines of a normalization.”
In its latest quarter, Microsoft had $US50 billion in sales that produced $US17.6 billion in profit.
Microsoft’s stock price was down more than 1 per cent on Wednesday morning.
Nadella said in a message to staff that the layoffs “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.”
The layoffs, which will begin Wednesday and continue through March, are the company’s largest in roughly eight years. Nadella cut about 25,000 jobs over the course of 2014 and 2015 as Microsoft abandoned its ill-fated acquisition of the mobile phone maker Nokia.
Like other tech companies, Microsoft expanded rapidly during the pandemic, hiring more than 75,000 people since 2019. Microsoft’s annual revenue grew 58% over three years, but rising interest rates and the prospect of a recession have tempered the company’s outlook. In the quarter that ended in October, it reported its slowest growth in five years and warned that more tepid results could follow.
Customers are seeking “to do more with less,” Nadella said. “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,” he added.
The changes, including severance and other restructuring expenses, will cost $US1.2 billion, Nadella said. In a regulatory filing, Microsoft said some of the costs would come from consolidating office leases, as well as “changes to our hardware portfolio.” Microsoft makes the Surface line of laptops and tablets, and demand for personal computers has fallen sharply from the pandemic highs, when companies and families purchased laptops to work and study from home.
In October, Amy Hood, the company’s finance chief, told investors that the slowdown in consumer PC sales that started in September would continue through at least June.
Microsoft is scheduled to report its quarterly earnings Tuesday.
Nadella said the company would continue to hire in strategic areas, and called advances in artificial intelligence “the next major wave of computing.”
The company has been pursuing several expensive bets, including potentially putting another $US10 billion into its investment in OpenAI, which makes the explosively popular ChatGPT artificial intelligence system, and a $US69 billion acquisition of the video game maker Activision that is facing challenges globally by antitrust regulators.
Other tech giants have also been reducing costs after several years of breakneck expansion. Amazon began what is expected to be a huge round of layoffs Wednesday as part of its plans to reduce its corporate workforce by about 18,000 jobs.
“The exit out of COVID this past year was challenging,” Doug Harrington, who heads Amazon’s retail and operations business, wrote Wednesday morning in a message to staff obtained by The New York Times.
He added that although the company had trimmed expenses, “we’ve determined that we need to take further steps to improve our cost structure so we can keep investing in the customer experience that attracts customers to Amazon and grows our business.”
The business software company Salesforce said this month that it planned to lay off 10% of its workforce, or about 8,000 employees; and Meta, the parent company of Facebook, announced at the end of last year that it was cutting more than 11,000 jobs.
Written by: Karen Weise
© 2023 THE NEW YORK TIMES
