We reported yesterday that Microsoft could announce the elimination of 10,000 positions this week. Today, in a memo sent out (opens in new tab) to all Microsoft employees, CEO Satya Nadella confirmed the disappointing news.
To put the layoffs into perspective, Nadella explained, “[We’re] 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… we as a company must strive to deliver results on an ongoing basis, while investing in our long-term opportunity.”
The workforce reduction, which Nadella says represents just under 5% of its global footprint of 220,000 employees, will occur between now and the close of Microsoft’s fiscal third quarter (March 31, 2023). Unfortunately, some employees will receive notices of dismissal as early as today, while others will face their fate with the company in the coming days and weeks.
The mass layoffs mean that Microsoft will take a $1.2 billion charge during fiscal Q3, in part to cover severance packages for employees. Speaking of which, Microsoft says that it will offer departing employees “above-market severance pay,” six months of continuing healthcare, and stock vesting for an additional six months.
“As a company, our success must be aligned to the world’s success,” Nadella continued. “That means every one of us and every team across the company must raise the bar and perform better than the competition… If we deliver on this, we will emerge stronger and thrive long into the future; it’s as simple as that.”
Despite this massive workforce reduction, Microsoft will “continue to hire in key strategic areas.” Nadella boasted in an interview two weeks ago with CNBC that he is “super long on India” and envisions the country elevating from its current fifth-place position to third place in global economies by 2030. He added, “India is an exception in a challenging world.”
Artificial intelligence is the next big mountain to climb in computing, and India is number one in the sector. So, it stands to reason that India will play a significant role in Microsoft’s more selective new hires in the coming months and years.
While 10,000 layoffs is a big number, it’s not the largest in the company’s history; Microsoft eliminated 18,000 positions in 2014. However, we should note that workforce reduction occurred during the transition from former CEO Steve Ballmer to Nadella. In addition, two-thirds of that figure came from employees let go following Microsoft’s doomed Nokia Devices and Services acquisition.
Microsoft isn’t the only big tech company feeling the heat from a slowing economy. Amazon is in the process of laying off 18,000 employees, while Facebook parent Meta is parting ways with 11,000 workers.