Microsoft cuts 10,000 employees, nearly 5% of its workforce, joining other tech companies who scaled back their expansions in the pandemic era.
The company said in a regulatory filing on Wednesday that the layoffs were a response to “macroeconomic conditions and changing customer priorities.”
The Redmond, Wash.-based software giant said it would also make changes to its hardware portfolio and consolidate its rented offices.
Microsoft is cutting far fewer jobs than it created during the COVID-19 pandemic in response to a boom in demand for its work software and cloud computing services with so many people working and studying from home.
“A lot of it is just over-exuberance in hiring,” said Vanderbilt University finance professor Joshua White.
Microsoft’s workforce grew by about 36% in the two fiscal years following the emergence of the pandemic, from 163,000 workers at the end of June 2020 to 221,000 in June 2022.
The layoffs represent “less than 5% of our total employee base, with some notices occurring today,” CEO Satya Nadella said in an email to employees.
“As we eliminate roles in certain areas, we will continue to hire in key strategic areas,” Nadella said. He stressed the importance of building a “new computing platform” using advances in artificial intelligence.
He said customers who were accelerating their digital technology spending during the pandemic are now trying to “optimize their digital spending to do more with less.”
“We also see organizations across all sectors and regions treading cautiously as some parts of the world are in recession and others are anticipating one,” Nadella wrote.
Other tech companies also cut jobs amid fears of an economic slowdown.
Amazon and enterprise software maker Salesforce announced major job cuts earlier this month as they cut payrolls that have grown rapidly during the pandemic lockdown.
Amazon said it would cut about 18,000 positions. It’s the largest round of layoffs in the Seattle company’s history, despite representing only a fraction of its 1.5 million employees worldwide.
Facebook’s parent company, Meta, is laying off 11,000 people, or about 13% of its workforce. And Elon Musk, the new CEO of Twitter, has downsized the company.
Nadella made no direct mention of the layoffs on Wednesday when he made an appearance at the annual meeting of the World Economic Forum happening this week in Davos, Switzerland.
Asked by forum founder Klaus Schwab what the tech layoffs meant for the industry’s business model, Nadella said companies that boomed during the COVID-19 pandemic are now seeing a “normalization” of that. request.
“Quite frankly, we in the tech industry are also going to have to be efficient, right?” said Nadel. “It’s not about everyone doing more with less. We will have to do more with less. So we will have to show our own productivity gains with our own type of technology.
Microsoft declined to answer questions about the concentration of layoffs and office closures. The company sent a notice to Washington state employment officials on Wednesday saying it was cutting 878 workers at its offices in Redmond and nearby towns of Bellevue and Issaquah.
In June, it had 122,000 workers in the United States and 99,000 elsewhere.
White, Professor Vanderbilt, said all industries were looking to cut costs ahead of a possible recession, but tech companies could be particularly sensitive to rapidly rising interest rates, a tool that has been used. aggressively in recent months by the Federal Reserve in its fight against inflation.
“It hits technology companies a little harder than industrials or consumer staples, because a lot of Microsoft’s value is in projects that won’t pay off cash flow for several years,” he said. -he declares.
Among the projects that have caught the eye recently is Microsoft’s investment in its San Francisco startup partner OpenAI, maker of the ChatGPT writing tool. and other AI systems capable of generating readable text, images, and computer code.
Microsoft, owner of the Xbox games business, also faces regulatory uncertainty in the United States and Europe delaying its planned $68.7 billion takeover of video game company Activision Blizzard, which had around 9,800 employees a year ago.
AP Business Writer Kelvin Chan contributed to this story from London.
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