Microsoft chief executive officer Satya Nadella just confirmed in a SEC (U.S. Securities and Exchange Commission) filing that the company will be laying off 10,000 employees by September. This move comes after a smaller and quieter round of cuts in October last year, involving 1000 employees.
It is not known yet which divisions of the company will be affected by today’s announcement.
Nadella added that the cuts “represent less than 5 percent of our total employee base, with some notifications happening today. It’s important to note that while we are eliminating roles in some areas, we will continue to hire in key strategic areas.”
According to Microsoft’s filing, the cutbacks are driven mainly by economic conditions, including customers slowing down and optimizing their digital spend post-pandemic, and a looming recession. “The next major wave of computing, with advances in AI” also prompted this shake-up.
The company is allocating US$1.2 billion in Q2, related to severance costs and other changes, including those to the company’s hardware portfolio, and to lease consolidations.
“We will treat our people with dignity and respect, and act transparently,” Nadella said in a blog post. “These decisions are difficult, but necessary. They are especially difficult because they impact people and people’s lives—our colleagues and friends.”
U.S.-benefit-eligible employees, he said, will receive “above-market severance pay, continuing healthcare coverage for six months, continued vesting of stock awards for six months, career transition services, and 60 days’ notice prior to termination.” Severance for employees outside the US would depend on their country’s employment laws.
The filing stressed that these decisions are the kinds of hard choices that the company has had to make over its 47 years of existence to remain competitive, in an industry that is “unforgiving to anyone who doesn’t adapt to platform shifts.”
Nadella also sought to encourage the surviving team. “It’s showtime—for our industry and for Microsoft. As a company, our success must be aligned to the world’s success. That means 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 we deliver on this, we will emerge stronger and thrive long into the future; it’s as simple as that.”
Today’s announcement might come as a ray of hope for investors as Microsoft prepares to report its financial results for the second quarter of its fiscal year 2023 next week. The company suffered massively, along with other Big Tech companies, in its last earnings call.