Microsoft to reduce workforce by 10,000 amid economic uncertainty

On Wednesday morning, Microsoft CEO Satya Nadella announced that the company would be dismissing 10,000 employees over the next several months in an effort to reduce costs and adapt to a challenging economic climate.

The move will affect approximately 5% of the software company's global workforce of 221,000, Microsoft stated in a regulatory filing and a memo to staff. In the memo, Nadella noted that the layoffs are part of a larger effort to balance their cost structure with current customer demand and invest in long-term opportunities.

“We will align our cost structure with our revenue and where we see customer demand … It’s important to note that while we are eliminating roles in some areas, we will continue to hire in key strategic areas,” he said.

Microsoft’s stock price remained flat in the first hour of trading, despite a 0.5% increase in the S&P 500 and a 0.8% increase in the technology-heavy NASDAQ. The company's stock price has decreased more than 20% over the past year, compared to a 12% decline in the former index and a 22% drop in the latter.

As part of the restructuring, Nadella noted that Microsoft would be allocating capital and talent to areas of “secular growth and long-term competitiveness” and divesting in other areas. He highlighted artificial intelligence as “the next major wave in computing”, and said the company is developing platforms with the most advanced models.

The layoffs come one month after the Federal Trade Commission blocked Microsoft’s proposed acquisition of video game developer Activision Blizzard for $69 billion, citing antitrust concerns.

Microsoft President Brad Smith defended the deal, insisting that it would expand competition and create more opportunities for gamers and game developers.

Microsoft’s earnings report for the first quarter of its fiscal year showed a 14% decrease in net income, even as revenues increased 11%.

Despite the uncertain economic climate, Nadella remained optimistic.

Nadella continued:

In a world facing increasing headwinds, digital technology is the ultimate tailwind.

We’re focused on helping our customers do more with less, while investing in secular growth areas and managing our cost structure in a disciplined way.