'Hard choices', says Satya Nadella as Microsoft cuts 10,000 jobs

Microsoft on Wednesday said it would reduce its workforce by 5 per cent, or 10,000 employees, by the end of the third quarter of financial year 2022-23 (FY23) as the firm braces for an economic downturn. The company’s financial year runs from July to June.

The impact of the move on its Indian operations could not be ascertained. It has around 20,000 employees here across the sales and marketing, and research and development verticals.

Microsoft’s move follows similar announcements made by other tech giants like Meta and Amazon.

In an internal mail to employees, Microsoft’s Chairman and Chief Executive Officer Satya Nadella said, “We’re living through times of significant change, and as I meet with customers and partners, a few things are clear. As we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimise their digital spend to do more with less. 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.” He also attributed the action to the shift in computing with platforms such as ChatGPT and GitHub Copilot.

“…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 wrote.

First, Microsoft will align its cost structure with its revenue and where the demand comes from. “It’s important to note that while we are eliminating roles in some areas, we will continue to hire in key strategic areas. The senior leadership team and I are committed that as we go through this process, we will do so in the most thoughtful and transparent way possible.”

He also added that the company would continue to invest in strategic 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.

Microsoft will take a $1.2 billion charge in Q2 related to severance costs, changes to hardware portfolio, and the cost of lease consolidation as it creates higher density across workspaces, the firm said.

“And third, we will treat our people with dignity and respect, and act transparently. These decisions are difficult, but necessary. They are especially difficult because they impact people and people’s lives – our colleagues and friends. We are committed to ensuring all those whose roles are eliminated have our full support during these transitions,” he added.

Eligible employees in the US will receive a variety of benefits, including above-market severance pay, continuing healthcare coverage for six months, vesting of stock awards for six months, career transition services, and 60 days’ notice before termination, regardless of whether such notice is legally required. Benefits for employees outside the US will align with the employment laws in each country.