Microsoft Confirms 10,000 Layoffs Amid Recession, Plans Significant AI Investments

Microsoft’s CEO Satya Nadella acknowledges that a significant workforce reduction is imminent.

Microsoft could announce the elimination of 10,000 positions this week, we reported yesterday. Today, CEO Satya Nadella confirmed the disappointing news in an internal memo sent to all Microsoft employees.

To put the layoffs in context, Nadella stated, “Organizations across all industries and geographies are exercising caution as some regions of the world are experiencing a recession and others are anticipating one… As a company, we must consistently deliver results while investing in our long-term opportunity.”

The workforce reduction, which Nadella says represents less than 5% of Microsoft’s 220,000-person global footprint, will take place between now and the end of Microsoft’s fiscal third quarter (March 31, 2023). Unfortunately, some employees will receive termination notices as soon as today, while others will learn their fate in the coming days and weeks.

As a result of the mass layoffs, Microsoft will incur a Q3 charge of $1.2 billion, in part to cover severance packages. Microsoft says it will offer “above-market severance pay,” six months of continuing healthcare, and stock vesting for an additional six months to departing employees.

“As a company, our success must be aligned with the success of the world,” continued Nadella. “That means each of us and every team in the organization must raise the bar and outperform the competition… It’s as simple as that: if we deliver on this, we will emerge stronger and thrive well into the future.

Microsoft will “continue to hire in key strategic areas” despite this significant workforce reduction. Nadella boasted in an interview with CNBC two weeks ago that he is “extremely bullish on India” and sees the country’s economy rising from its current fifth-place position to the third-place position by 2030. He added, “India is an anomaly in a difficult world.”

Artificial intelligence is the next major challenge in computing, and India is the leader in the field. India will likely play a significant role in Microsoft’s more selective new hires over the next few months and years.

Microsoft eliminated 18,000 positions in 2014, making Microsoft’s 2014 layoffs the largest in the company’s history. We should note, however, that workforce reductions occurred during the transition from former CEO Steve Ballmer to Nadella. In addition, two-thirds of this number was comprised of employees laid off after Microsoft’s unsuccessful Nokia Devices and Services acquisition.

Microsoft is not the only major technology company feeling the effects of an economic slowdown. Amazon is currently laying off 18,000 employees, while Facebook’s parent company Meta is laying off 11,000 employees.

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