Microsoft announced that it plans to eliminate nearly 10,000 jobs, or nearly 5% of its workforce, in an attempt to save $1 billion in costs. The layoffs could continue until the end of the third quarter of fiscal 2023. Microsoft CEO Satya Nadella also wrote a public blog post, also aimed at company employees, outlining the company’s reasons for such a move.
In the post, Nadella emphasized that now is a time of major change, and it is clear that while Microsoft saw “customers accelerate their digital spending during the pandemic, we are now seeing them optimize their digital spending, Do more with less.” Organizations in “every industry and region” are now “cautious as some parts of the world are in recession and others are forecasting a recession,” he said.
He further noted that advances in artificial intelligence are ushering in a new wave of computing, which will be the company’s next major focus area. Microsoft is already in talks to invest another $10 billion in OpenAI — Dall-E, the startup behind ChatGPT. In fact, Microsoft will start offering ChatGPT to its Azure customers as part of its Azure OpenAI service.
According to Nadella, companies need to invest in long-term opportunities, and clearly, artificial intelligence is one such key area. The post adds that Microsoft will take three steps to keep these long-term goals in mind. The first is cost restructuring, which will affect 10,000 jobs. That’s “less than 5% of our workforce,” according to the post. Some employees were notified yesterday. However, Nadella also said that Microsoft will continue to “hire in key strategic areas.”
The second step is that Microsoft will “continue to invest in our future strategic areas, which means we will allocate our capital and talent to areas of long-term growth and long-term competitiveness of the company, while divesting other areas.” A $1.2 billion charge in the second quarter was related to severance, changes to our hardware mix, and lease consolidation costs” as it “created higher density in our workspaces.”
Third, those who are laid off will receive the benefits of the transition process. The post states, “Employees eligible for U.S. benefits will receive a variety of benefits, including above-market severance pay, six months of continuous health coverage, six months of continuous stock award vesting, career transition services, and 60 days’ notice prior to termination, whether or not Whether such notification is required by law.” For those outside the U.S., benefits will depend on each country’s employment laws.
The blog post concludes, “When I think about this moment, the start of 2023, it’s show time for our industry and for Microsoft. Our success as a company must align with the world’s success. That means each of us and every team across the company must raise the bar and outperform the competition to deliver meaningful innovation that truly benefits customers, communities and the country. If we do this, we will emerge stronger and thrive long into the future; simple as that. “ Nadella also thanked all employees who have contributed to Microsoft in the post.