Microsoft is cutting 10,000 jobs, almost 5% of its workforce, joining other tech companies that have scaled back their expansion during the pandemic.
The company said in a regulatory filing Wednesday that the layoffs are a response to “macroeconomic conditions and changing customer priorities.”
The Redmond, Washington-based software giant also said it will make changes to its hardware portfolio and consolidate office space it leases.
Microsoft is cutting far fewer jobs than it added during the COVID-19 pandemic in response to increased demand for workplace software and cloud computing services as more people work and study from home.
“A big part of it is overzealous hiring,” said Joshua White, a finance professor at Vanderbilt University.
Microsoft’s workforce expanded nearly 36% in the two fiscal years since the pandemic emerged, from 163,000 employees at the end of June 2020 to 221,000 employees in June 2022.
CEO Satya Nadella said in an email to employees that the layoffs “combined with some of the announcements today represent less than 5 percent of our total employee base.”
“While we will eliminate roles in some areas, we will continue to hire in key strategic areas,” Nadella said. He emphasized the importance of creating a “new computing platform” using the achievements of artificial intelligence.
He said customers who accelerated their spending on digital technology during the pandemic are now trying to “optimize their digital spending to do more with less.”
“We’re seeing organizations in every industry and geography exercise caution as some parts of the world are in recession and other parts are waiting for a crisis,” Nadella wrote.
There have been other technology companies as well cutting work amid concerns about an economic slowdown.
Amazon and business software maker Salesforce announced major job cuts earlier this month as they cut payrolls that have been expanding rapidly during the pandemic lockdown.
Amazon said it would cut about 18,000 jobs. While that’s just a fraction of the 1.5 million global workforce, it’s the largest set of layoffs in the Seattle company’s history.
Facebook parent company Goal is laying off 11,000 people, about 13% of its workforce. And Twitter’s new CEO, Elon Musk, has cut the company’s workforce.
Speaking on Wednesday at the World Economic Forum’s annual meeting this week in Davos, Switzerland, Nadella made no announcement about the layoffs.
Asked by forum founder Klaus Schwab what the tech cuts mean for the industry’s business model, Nadella said companies that thrived during the COVID-19 pandemic are now seeing that demand “normalize.”
“Obviously, we have to be efficient in the tech industry too, right?” Nadella said. “It’s not about everyone doing more for less. We will have to do more with less. Thus, we will have to show our productivity with our own technology.”
Microsoft did not immediately respond to questions about where the layoffs and office closings would be concentrated. As of June, it had 122,000 employees in the United States and 99,000 elsewhere.
White, the Vanderbilt professor, said all industries are trying to cut costs ahead of a possible recession, but technology companies may be particularly vulnerable to the rapid interest rate hikes used aggressively by the Federal Reserve in recent months. fight against inflation.
“It hits tech companies a little harder than industrial or consumer products, because so much of Microsoft’s value is in cash-flow projects that won’t pay off for a few years,” he said.
Among recent notable projects is Microsoft’s investment in San Francisco startup partner OpenAI, maker of the writing tool ChatGPT and other artificial intelligence systems that can generate readable text, images and computer code.
Microsoft, which owns the Xbox game business, also faces regulatory uncertainty in the United States and Europe, and a year ago planned to buy Activision Blizzard, a video game company with about 9,800 employees, for $68.7 billion.
AP Business Writer Kelvin Chan contributed to this story from London.
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