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July 17, 2014

Microsoft Axing 18,000 Jobs Over One-Year Period

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As many as 18,000 Microsoft employees could soon be looking for work as the software giant cuts back on its staff over the next 12 months.

The move comes as CEO Satya Nadella looks to change the culture at Microsoft with a company-wide shake up.

Satya Nadella

Satya Nadella

“The first step to building the right organization for our ambitions is to realign our workforce,” he said in an e-mail to employees.

That re-alignment will begin with Nokia Devices and Services, which is expected to make up about 12,500 of the lost jobs. The positions will be both professional and factory workers.

Microsoft acquired Nokia’s handset business for $7.2 billion in April.

Although Nadella did not say what section of the company the remaining 5,500 positions would be cut from, media reports indicate it will be spread out among the other divisions.

“We are moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months,” Nadella said. “It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas. My promise to you is that we will go through this process in the most thoughtful and transparent way possible. We will offer severance to all employees impacted by these changes, as well as job transition help in many locations, and everyone can expect to be treated with the respect they deserve for their contributions to this company.”

Nomura Securities analyst Rick Sherlund said the re-organization makes sense because Nadella, now with six months under his belt as leader, will want to put his own stamp on the company.

“We viewed his letter yesterday to employees as putting everyone on notice that he wants to make organizational changes to reduce layers of management, fix accountability, stimulate innovation and implement organizational changes,” said Sherlund, a longtime Microsoft expert.

Sherlund said Microsoft could eradicate about $1 billion in costs through a 25 percent reduction in the Nokia business.

Lead analyst at J. Gold Associates Jack Gold called Nadella’s move a good one — one that will “realign Microsoft for the future and accelerate reinventing itself for success.”

“I believe that Nadella gets the fact that Microsoft can’t be Apple – a totally vertically integrated environment, and will refocus on cloud, services and SW assets that are growing and profitable. This is a similar path that Google took over the past few years as it too tried to be Apple for a while and realized it couldn’t,” Gold said.

“This is the first major salvo in the new Nadella era – moving away from the (Steve) Ballmer era where he focused on being a devices and services company with an eye to competing head to head with Apple on all things. So far I believe Nadella is making all the right moves to refocus on Microsoft strengths and what it can bring to the new era of computing in the cloud, internet of things, personal productivity products, etc. And to having a laser focus on what enterprises require (a very large portion of Microsoft’s business).”


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Jennifer Cowan is the Managing Editor for SiteProNews.

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