News

Microsoft Reportedly Bracing for Largest Job Cuts to Date

• By Kurt Mackie
• July 16, 2014

Massive layoffs -- perhaps the most extensive in the company's history -- could be coming to Microsoft sometime this month, according to press reports.

Last week, a CNET article citing Nomura Securities analyst Rick Sherlund said Microsoft is considering job cuts ranging from 5 percent to 10 percent.

This week, unnamed sources told Bloomberg that the coming job cuts could exceed 5,800 personnel. If so, the layoff could be larger than the cuts made in 2009, which, at that time, represented Microsoft's biggest companywide layoff.

Microsoft has not definitively stated that it will be carrying out such a layoff, so the reports are still at the rumor stage.

However, the reports appear supported by the July 10 memo sent by CEO Satya Nadella to Microsoft's employees. The memo indicated that Microsoft would take "actions to flatten the organization and develop leaner business processes," which suggests a headcount reduction.

Microsoft currently has 127,104 employees, but it acquired about 25,000 Nokia employees as part of its acquisition of Nokia, which was completed in late April. According to the Bloomberg's sources, cuts could be made where Nokia jobs overlap those at Microsoft. Xbox marketing was also mentioned as a possible target.

Nadella characterized Microsoft as a "productivity and platform company" in his July 10 memo, varying from former CEO Ballmer's "devices and services company" formulation, which was part of a company restructuring effort kicked off in mid-July 2013. This month, Nadella promised further clarification about the "engineering and organization changes we believe are needed."

In the past, Microsoft prevailed in its markets largely through its Windows platform monopoly, but most of its investments of late have gone into its cloud computing platform with Microsoft Azure. At Microsoft's Worldwide Partner Conference this week, Kevin Turner, Microsoft's chief operating officer, noted that Windows has just a 14 percent market share globally when considered in the context of mobile devices. The Windows Phone OS still trails Android and iOS, according to analyses from IDC and Gartner Inc.

However, Scott Guthrie, Microsoft's executive vice president of the Microsoft Cloud and Enterprise group, claimed during the WPC keynote talk that Microsoft has built out more datacenter infrastructure to support its cloud-based services than its competitors, namely Amazon Web Services and Google.

Nadella, in an early statement upon becoming Microsoft's new CEO, stressed that Microsoft is still in a transition phase in moving its customers toward subscribing to cloud-based services versus the more traditional perpetual licensing model.

Microsoft plans to announce its earnings results from its fiscal fourth quarter next week, which likely could be when Nadella will announce the new organizational changes, and possibly the rumored layoffs. Despite those rumors, Microsoft performed well in its fiscal third quarter, largely meeting financial analyst expectations.