Satya Nadella
July 18, 2014

Microsoft CEO Announces Largest Workforce Reduction In The Company’s History

redOrbit Staff & Wire Reports - Your Universe Online

Microsoft has announced that it will be cutting as many as 18,000 jobs, the largest workforce reduction in the 39-year history of the Redmond, Washington-based computer and technology giant, various media outlets have reported.

According to Reuters reporter Bill Rigby, the cuts announced Thursday by new CEO Satya Nadella represent 14 percent of Microsoft’s total workforce, and the “larger-than-expected” layoffs come as the company is attempting to move away from traditional computing and re-focus on cloud-computing and mobile app software development.

Nadella, who first announced his intention to turn Microsoft into a “devices and services” company similar to Apple in a public email to employees last week, noted that “nothing is off the table in how we think about shifting our culture” and becoming “the productivity and platform company for the mobile-first and cloud-first world.”

In a second memo made public Thursday, the new chief executive took what he called “the first step to building the right organization for our ambitions” by cutting approximately 12,500 professional and factory jobs from recently-acquired Nokia.

Nadella went on to state that the so-called “workforce reductions” were primarily driven “by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment.”

Aside from the Nokia cuts, Nadella provided little information about what other divisions could be affected by the job cuts, only promising to provide more details following Microsoft's quarterly earnings report on July 22, according to a separate Reuters report.

However, Mashable’s Todd Wasserman reported Thursday afternoon that Microsoft Xbox division head Phil Spencer confirmed the layoffs would result in the closure of its direct-to-Xbox entertainment branch. Reuters had previously cited unidentified sources that the video game software development division and its 175 employees were potentially on the chopping block.

While the layoffs are bad news for the company’s employees, the news organization noted that they were welcomed by Wall Street investors who felt the company had become “bloated” under former CEO Steve Ballmer. FBR Capital Markets analyst Daniel Ives told Reuters the cuts were “double” what was expected, and lauded Nadella for “clearing the decks for the new fiscal year” and “cleaning up part of the mess that Ballmer left.”

Over the next four quarters, Microsoft is expected to be on the hook for between $1.1 billion and $1.6 billion in charges, primarily due to forthcoming severance payments, said USA Today reporter Nancy Blair.

While redundancies played a large role in the sizable cuts at Nokia, Blair noted that there is some speculation that Nokia’s future is in doubt. Even though Nadella is looking to build up the company’s mobile market, some analysts claim he was not in favor of the Nokia acquisition. Even after these cuts, Microsoft still has nearly 10,000 more employees (109,000 in all) more than it did before buying out the Finnish mobile service provider, she added.