January 28, 2023

Microsoft on Wednesday became the latest in a growing list of big tech layoffs amid economic concerns and overhiring during the pandemic.

Microsoft Chief Executive Satya Nadella said on Wednesday the company plans to cut 10,000 jobs as it cuts costs amid economic uncertainty and refocuses on strategic priorities such as artificial intelligence.

microsoft hire About 221,000 workers As of the end of June, the layoffs accounted for less than 5% of its global workforce.

With the layoffs, Microsoft becomes the latest tech giant to exit after a few years of hiring spree when a pandemic-fueled surge in online services and the expansion of cloud computing sparked fierce competition for tech talent.

Microsoft and its peers respond to booming customer demand and a talent race by hoarding tech workers. “The reality is you can adjust hiring very quickly, and that’s what’s happening,” said Brad Reback, an analyst at investment bank Stifel. “I don’t think it’s a symptom of a bigger problem. It’s more along the lines of normalization.” “

Many tech companies still make more money than executives in other industries can only dream of. In its most recent quarter, Microsoft posted $17.6 billion in profit on sales of $50 billion.

Shares of Microsoft were down more than 1% Wednesday morning.

Mr Nadella Say In a message to employees, the layoffs “are difficult choices we’ve made in our 47-year history to remain a significant company in this industry, and it will be ruthless to anyone who doesn’t adapt to the platform shift.”

The layoffs, which will begin on Wednesday and continue until March next year, are the company’s largest layoffs in nearly eight years. Nadella cut about 25,000 jobs between 2014 and 2015 as Microsoft walked away from its ill-fated acquisition of phone maker Nokia.

Like other tech companies, Microsoft has expanded rapidly during the pandemic, hiring more than 75,000 people since 2019. Microsoft’s annual revenue has grown 58% in three years, but rising interest rates and the prospect of a recession have dented the company’s outlook. In the quarter to October, it reported its slowest growth in five years and warned that more tepid results could follow.

Clients are looking to “do more with less,” Mr. Nadella said. “We’re also seeing caution from organizations in every industry and region, as some parts of the world are in recession and others are forecasting a recession,” he added.

The changes, including severance and other restructuring costs, will cost $1.2 billion, Nadella said.in a regulatory recordMicrosoft said some of the costs will come from combining office leases, as well as “changes in our hardware mix.” Demand for PCs, which Microsoft makes its Surface line of laptops and tablets, has plummeted from highs during the pandemic, when companies and families bought laptops to work and learn from home.

In October, the company’s chief financial officer, Amy Hood, told investors that the slowdown in consumer PC sales that began in September would continue through at least June.

Microsoft is scheduled to report its quarterly earnings on Tuesday.

Nadella said the company will continue to hire in strategic areas, calling advances in artificial intelligence “the next major wave of computing.”

The company has been making several costly bets, including a possible $10 billion more investment in OpenAI, which makes the popular ChatGPT artificial intelligence system, and a $69 billion acquisition that faces antitrust scrutiny around the world. Agency-challenged video game maker Activision .

After several years of rapid expansion, other tech giants have also been cutting costs. Amazon will start mass layoffs on Wednesday as part of its plan to cut about 18,000 jobs.

“Covid exiting the past year has been a challenge,” Amazon’s head of retail and operations Doug Harrington wrote in an email to employees Wednesday morning, obtained by The New York Times.

He added that despite the company’s spending cuts, “we have determined that we need to take further steps to improve our cost structure so that we can continue to invest in the customer experience that attracts customers to Amazon and grows our business.”

Business software company Salesforce said this month it planned to cut 10 percent of its workforce, or about 8,000 employees, while Facebook parent Meta announced late last year that it would cut more than 11,000 jobs.



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