Microsoft Corp. plans to cut up to 18,000 jobs over the next year, a 14% workforce reduction aimed at ditching management layers and building a more agile technology powerhouse.
The broadest layoffs in the company’s 39-year history, announced Thursday morning, surpassed expectations of analysts and observers for cuts of 6,000 to 12,000 employees.
About 12,500 of the layoffs will come during the next six months from Nokia’s mobile phone unit, which Microsoft purchased in April. The acquisition had swelled the Microsoft payroll from 99,000 to 127,000 employees worldwide. Both factory and professional jobs will be eliminated, including engineers at Nokia's office in San Diego.
The company didn’t detail where the other 6,000 position cuts would come from. But in a memo to employees Thursday, Chief Executive Satya Nadella emphasized that cutting bureaucracy is key.
“We will simplify the way we work to drive greater accountability, become more agile and move faster,” Nadella wrote. “As part of modernizing our engineering processes the expectations we have from each of our disciplines will change. In addition, we plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making.”
The cuts will trigger a charge of $1.1 billion to $1.6 billion on the company's books to cover severance and benefit costs during the next year, Microsoft said.
In a note to clients, FBR Capital Market analysts Daniel Ives and James Moore said that while the cuts were “painful” for employees, they were certainly necessary considering all the duplication Nokia brought in the door.
“Microsoft needs to be a ‘leaner and meaner’ technology giant over the coming years in order to strike the right balance of growth and profitability around its cloud and mobile endeavors,” they said.
Microsoft, whose Windows operating system still powers most traditional computers, has fallen far behind that of Google and Amazon in bids to be the brains of smartphones, tablets and servers — the areas of computing showing the greatest growth.
Microsoft's only previous mass layoff came in 2009, when the company announced that a “once-in-a-lifetime set of economic conditions” had forced the more than 5,000 cuts, about 6% of the workforce at the time.
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