Microsoft is laying off over 10,000 employees, taking a $1.7 billion charge as its cloud-computing customers dissect their spending and the company braces for a potential recession.
The lay-off pile of tens of thousands of job cuts across the technology sector is long past its ceaseless growth during the pandemic.
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In a note to employees, Microsoft CEO Satya Nadella said the lay-offs, which affect less than 5.0 per cent of the workforce, would begin this week and will conclude by the end of March.
The timing corresponds with the date its rival Amazon has said more employees will be notified in its own 18,000-person lay-offs.
CEO Nadella said customers wanted to “optimise their digital spend to do more with less” and “exercise caution as some parts of the world are in a recession and other parts are anticipating one”.
Another company serving enterprises, Palantir Technologies Inc, said this week that reducing cloud spending was a top-ten priority of its customers.
In addition to severance costs, Microsoft would take a billion-dollar charge from changes to its line-up of hardware products and from consolidating leases “as we create higher density across our workspaces,” Nadella said.
The charge in the second quarter of fiscal 2023 represents a negative impact of 12 US cents per share profit, Microsoft said.
“This is a rip the band-aid off moment to preserve margins and cut costs in a softer macro, a strategy the Street will continue to applaud,” Wedbush Securities analyst Dan Ives said.
Nadella said Microsoft would continue to invest capital and talent in strategic innovation areas like AI and a service offering OpenAI’s ChatGPT, a futuristic chatbot that has captivated Silicon Valley.
“The next major wave of computing is being born with advances in AI, as we’re turning the world’s most advanced models into a new computing platform,” he said.
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Microsoft said in July last year that a small number of roles had been eliminated while news site Axios in October reported that the company had laid off fewer than 1000 employees across several divisions.
The company is also grappling with a slump in the personal computer market after a pandemic boom fizzled out, leaving little demand for its Windows and accompanying software.
With AAP