News

Microsoft to Lay Off 18,000 Workers

Middle management, former Nokia employees will suffer the brunt of the cutbacks.

• By Jeffrey Schwartz
• 07/17/2014

What was hinted at has now become a reality: Microsoft is cutting its workforce. That's no surprise. What is surprising, however, is the scope of the layoffs.

This morning, the company announced what was widely rumored – it will kick off the largest round of layoffs in the company's history. Microsoft will reduce its workforce by 18,000 employees --much greater than analysts had anticipated. More than two thirds of them – 12,500 -- will affect workers in its Nokia factories, with the rest impacting other parts of the company aimed toward creating a flatter and more responsive organization.

CEO Satya Nadella announced the job cuts just one week after indicating that major changes were in the works. Just yesterday in his keynote address at Microsoft's Worldwide Partner Conference in Washington, D.C. Nadella re-iterated that the company must change its culture and be easier to do business with. Since Microsoft announced its intent to acquire Nokia last year for $7.2 billion, critics were concerned it would be a drag on the company's earnings. Nadella clearly signaled he is moving to minimize its impact.

The larger than expected reductions from Nokia is the result of a plan to integrate the company's operations into Microsoft, Nadella said in an e-mail to employees announcing the job cuts, 13,000 of which will take place over the next six months. "We will realize the synergies to which we committed when we announced the acquisition last September," Nadella said. "The first-party phone portfolio will align to Microsoft's strategic direction. To win in the higher price tiers, we will focus on breakthrough innovation that expresses and enlivens Microsoft's digital work and digital life experiences. In addition, we plan to shift select Nokia X product designs to become Lumia products running Windows. This builds on our success in the affordable smartphone space and aligns with our focus on Windows Universal Apps."

Nadella also said Microsoft is looking to simplify the way employees work by creating a more agile structure that can move faster than it has and make workers more accountable.  "As part of modernizing our engineering processes the expectations we have from each of our disciplines will change," he said, noting there will be fewer layers of management to accelerate decision making.

"This includes flattening organizations and increasing the span of control of people managers," he added. "In addition, our business processes and support models will be more lean and efficient with greater trust between teams. The overall result of these changes will be more productive, impactful teams across Microsoft. These changes will affect both the Microsoft workforce and our vendor staff. Each organization is starting at different points and moving at different paces."

The layoffs don't mean Microsoft won't continue to hire in areas where the company needs further investment said. Nadella said he would share more specific information on the technology investements Microsoft will make during its earnings call scheduled for July 22.