Microsoft declares up to 18000 job cuts; biggest ever in tech giant’s history
Around 12,500 job cuts are expected to come from the Nokia unit, which Microsoft acquired in April for $7.2 billion and signals a clear step back from former CEO Steve Ballmer’s strategy of getting Microsoft to make its own smartphones and tablets. (Image: Geek Sugar)
Microsoft is set to cut up to 18,000 jobs over the next year, which, according to Reuters, could be the deepest job cuts in the company’s 39-year history.
The cuts mean a reduction of around 14 percent of the company’s workforce as Microsoft had 127,104 employees as of June 5, 2014.
Many of the cuts are expected to come from the Nokia unit, which Microsoft acquired in April for $7.2 billion.
In a public email by CEO Satya Nadella to employees on July 17, 2014, the tech giant declared that around 12,500 job cuts will come from Nokia — nearly half of the 28,000 employees Microsoft brought on board through the acquisition.
When the cuts are complete, the company will still have about 10,000 more employees than before the Nokia acquisition, with an overall headcount of 109,000.
Nadella said the changes were needed for the company to “become more agile and move faster.”
“We are moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months,” he added in the memo.
The move also pushes Nokia to focus solely on the Windows Phone operating system and is a clear step back from former CEO Steve Ballmer’s strategy of getting Microsoft to make its own smartphones and tablets.
This cut comes five months into Nadella’s tenure, as Microsoft reshapes as a cloud-computing and mobile-friendly software company.
However, Microsoft had already announced when it struck the deal to buy the Finnish phone maker that it would cut $600 million per year in costs within 18 months of closing the acquisition.
This move is “designed to help Microsoft shift from being a primarily software-focused company to one that sells online services, apps and devices that it hopes will make people and businesses more productive,” according to Nadella.
By industry reckoning, Nadella needs to make Microsoft a stronger competitor to Google and Apple, which have dominated the new era of mobile-centric computing.
Microsoft is also expected to trim staffing at its Xbox game and entertainment unit, which Nadella praised last week in a blog post as a unit that scores high on innovation, but stopped short of describing it as a “core” business.
Marking this change of emphasis, Nadella’s blog rebranded Microsoft as “the Productivity and Platform Company for the mobile-first and cloud-first world.”
Nadella indicated that Microsoft will largely abandon low-price Nokia Asha phones, which work on a non-Windows operating system. The company will also reverse a move by Nokia in February to launch a line of phones called “X” that support rival Google’s Android platform.
“To win in the higher price tiers, we will focus on breakthrough innovation that expresses and enlivens Microsoft’s digital work and digital life experiences,” Nadella said in the memo.
Meanwhile, Associated Press reported that some 1,350 Seattle-area workers around Microsoft’s Redmond, Washington, headquarters were laid off Thursday, as were 1,800 workers in Hungary and nearly 370 in San Diego. The Nokia cuts include 1,100 jobs in Finland.
The international news agency also noted that the company is closing Xbox Entertainment Studios, a 2-year-old venture based in Santa Monica, California, that produced original video content but was seen as separate from “core” business.
These widespread job cuts, ironically enough, follow in the footsteps of the February 2013 launch of YouthSpark, a global initiative that aims to create opportunities for 300 million youth in more than 100 countries over the following three years.