Microsoft on Wednesday became the latest addition to a growing list of big tech companies that have announced plans to lay off employees due to overhiring during the pandemic and concerns about the economy.
The company will lay off 10,000 workers, said Satya Nadella, Microsoft’s chief executive, as it seeks to cut costs amid economic uncertainty and refocus on priorities such as artificial intelligence.
microsoft employee about 221,000 workers at the end of June, and the cuts amount to less than 5 percent of its global workforce.
With the cuts, Microsoft joined a host of other tech giants that have pulled out after several years of frenzied hiring to cope with the pandemic-driven surge in online services and the spread of cloud computing. The technology industry grew faster than it had in decades, rivaling the expansion of the dot-com boom of the 1990s.
Microsoft and its peers responded to growing customer demand by amassing technical staff. But the market slowed last year as workers began returning to their offices, inflation squeezed budgets and consumers sought entertainment outside their homes.
“The reality is that you can adjust hiring very quickly, and that’s what’s happening,” said Brad Reback, an analyst at investment bank Stifel. “I don’t think this is a symptom of a bigger problem.”
The industry slowdown has been particularly hard on smaller tech companies, and companies that specialized in newer concepts like crypto have been hit significantly. But the tech giants have not been spared. Among the big companies in the industry, Google parent Alphabet and Apple are the only companies yet to announce significant layoffs.
Speaking at the annual meeting of the World Economic Forum in Davos, Switzerland, on Wednesday, Mr. Nadella saying that after the rapid acceleration during the pandemic, “frankly, we in the tech industry are going to have to be efficient as well.” He added that the industry “will have to show its own productivity gains” using its own technology.
Still, some of the biggest companies in the tech industry continue to measure their profits in the tens of billions of dollars. In the quarter ending in September, Microsoft had $50 billion in sales that produced $17.6 billion in profit. has also continued return money to investors via quarterly dividends and a $60 billion share buyback program authorized by its board of directors in 2021.
The company’s annual revenue grew 58 percent in three years, during which time it hired more than 75,000 people. But rising interest rates and the prospect of a recession have dimmed Microsoft’s prospects. In the latest quarter, it reported its slowest growth in five years and warned that more tepid results could follow.
Microsoft’s stock price was down more than 1 percent in afternoon trading on Wednesday and is down about 22 percent in the past year, better than many of its tech peers. The company is scheduled to report its next quarterly earnings on Tuesday.
Microsoft is moving forward with several expensive bets, including the possibility of putting another $10 billion into its investment in OpenAI, which makes the ChatGPT artificial intelligence system explosively popular, and a $69 billion acquisition of video game maker Activision that faces challenges globally from antitrust regulators. .
Mr Nadella saying in a message to staff that the layoffs “are the kind of tough decisions we’ve made over our 47-year history to remain an important company in this industry that doesn’t forgive anyone who doesn’t adapt to changing platform”.
The layoffs, which began Wednesday and will continue through March, are the company’s biggest in about eight years. Nadella cut around 25,000 jobs over the course of 2014 and 2015 as Microsoft abandoned its ill-fated acquisition of mobile phone maker Nokia.
Despite high-profile layoffs from some of the biggest names in tech (Microsoft, Amazon, Meta, and others), the overall job market remains strong across the board. Cooling wage growth has given some investors optimism that it will ease pressure on the Federal Reserve to keep raising interest rates, but hiring has slowed only slightly.
The skills of engineers and other technical talent are still in high demand. Those laid off will likely find jobs directly in industries like banking, retail or health care, which are experiencing the digitization of their operations, rather than at big tech companies, say job analysts and recruiters.
Customers are looking to “do more with less,” Nadella wrote to employees. “We are also seeing organizations across industries and geographies exercise caution as some parts of the world are in a recession and other parts anticipate one,” she added.
The changes, including severance pay and other restructuring expenses, will cost $1.2 billion, Nadella said. in a regulatory framework presentationMicrosoft said some of the costs would come from consolidating office leases, as well as “changes to our hardware portfolio.”
Microsoft makes the Surface line of laptops and tablets, and demand for personal computers has fallen sharply from pandemic highs, when businesses and families bought laptops for work and study from home. In October, Amy Hood, the company’s chief financial officer, told investors that the slowdown in consumer PC sales that began in September would continue through at least June.
Nadella said the company would continue to hire in strategic areas, calling advances in artificial intelligence “the next great wave of computing.”
Other tech giants have also been cutting costs. Amazon began what is expected to be a large round of layoffs on Wednesday, as part of its plans to cut its corporate workforce by around 18,000 jobs.
“Exiting from Covid last year was challenging,” Doug Herrington, who runs Amazon’s retail and operations business, wrote Wednesday morning in a message to staff obtained by The New York Times.
He added that while the company had cut spending, “we have determined that we must take additional steps to improve our cost structure so that we can continue to invest in the customer experience that attracts customers to Amazon and grows our business.”
Mr. Herrington wrote that the company would continue to invest in areas including healthcare and supermarkets.
Business software company Salesforce said this month it planned to lay off 10 percent of its workforce, or about 8,000 employees, and Meta, Facebook’s parent company, announced late last year it was cutting more than 11,000 jobs. . .
