Microsoft will lay off 10,000 workers, about five per cent of its total workforce, its CEO Satya Nadella announced on Wednesday, terming it a hard choice that the tech giant had to make to remain a "consequential company" amid global economic uncertainties.
Microsoft is the latest company after Facebook and Amazon to cut jobs as the bloodbath continues in the technology sector in 2023.
Describing the current times as “significant change”, Indian-origin Nadella said customers who accelerated their digital spend during the Covid-19 pandemic, are now optimising their digital spend to do more with less.
“Today, we are making changes that will result in the reduction of our overall workforce by 10,000 jobs” through the end of the third quarter of fiscal year 2023, he said.
“This represents less than 5 per cent of our total employee base. We know this is a challenging time for each person impacted,” Nadella said in an email sent to employees.
Microsoft will take a $1.2 billion charge in the second quarter related to severance costs, changes to its hardware portfolio, and the cost of lease consolidation as the company creates higher density across its workspaces.
“We're also seeing organisations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one,” Nadella said.
At the same time, Nadella noted that the next major wave of computing is being born with advances in Artificial Intelligence.
He said Microsoft will continue to invest in strategic areas for its future, allocating both 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,” he said.
Impacted employees will receive severance pay, continuing healthcare coverage for six months, continued vesting of stock awards for six months and 60 days' notice prior to termination.
The bloodbath in the tech sector that began last year is continuing into 2023 and Microsoft is the latest technology company to undertake huge lay-offs.
Meta, the parent of Facebook, Instagram and WhatsApp laid off more than 11,000 workers or about 13 per cent of its workforce in November.
“I want to take accountability for these decisions and for how we got here.
"I know this is tough for everyone, and I'm especially sorry to those impacted,” Facebook founder Mark Zuckerberg had said.
Amazon is laying off more than 18,000 employees as global economic uncertainty forces companies to trim costs and restructure operations.
CEO Andy Jassy had said in a company communication earlier this month that, “This year's review has been more difficult given the uncertain economy and that we've hired rapidly over the last several years.”