January 31, 2023

The current economic climate is causing many tech companies to make tough decisions, including layoffs, to stay afloat. Today, Microsoft announced significant job cuts that will affect 10,000 employees. CEO Satya Nadella stated that the company will be “making changes that will result in the reduction of our overall workforce by 10,000 jobs through the end of FY23 Q3.” This marks the second-biggest layoff in Microsoft’s history, surpassing the 5,800 reductions in 2009.

These layoffs come weeks after Nadella hinted that the software maker and other tech companies would face a challenging two years ahead, stating in an interview that Microsoft wasn’t “immune to global changes” and spoke of the need for tech companies to be efficient.

Sources familiar with the matter said that today’s job cuts will affect employees working on HoloLens and Microsoft Edge, as well as those in Microsoft’s marketing teams, 343 Industries and Bethesda. While over 800 employees have been notified today, the entire 10,000 layoffs are expected to be completed by the end of March. However, Nadella said the company will continue to hire in key strategic areas.

“We will continue to invest in strategic areas for our future, meaning we are allocating both our capital and talent to areas of secular growth and long-term competitiveness for the company while divesting in other areas. These are the kinds of hard choices we have made throughout our 47-year history to remain a consequential company in this industry that is unforgiving to anyone who doesn’t adapt to platform shifts,” said Nadella.

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Impact on affected employees

In an effort to consolidate the affected US employees, the company will offer an “above-market severance pay,” healthcare coverage and continued vesting of stocks for six months, career transition services, and 60 days’ notice before termination. Additionally, CEO Satya Nadella also revealed that the company will be taking a $1.2 billion charge in its Q2 earnings that are due next week. This charge is “related to severance costs, changes to our hardware portfolio, and the cost of lease consolidation as we create higher density across our workspaces.”

These cuts and the $1.2 billion charge foreshadow missed revenue targets in parts of Microsoft’s business. However, Microsoft is not alone in announcing layoffs among big tech companies, with Meta announcing layoffs affecting 11,000 employees last year and Amazon’s massive layoffs affecting 18,000 employees.