Sunday, 5 February, 2023
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Microsoft to axe 10,000 jobs as tech gloom deepens

Microsoft on Wednesday said it would lay off 10,000 employees in the coming months as the economic downturn continues to punish US tech giants.

The job cuts will affect slightly less than five percent of employees and follow in the wake of similar moves by Facebook-owner Meta, Amazon and Twitter which have announced thousands of layoffs in the once-unassailable tech sector.

The cuts were "in response to macroeconomic conditions and changing customer priorities," the maker of the Windows operating system said in a US regulatory filing.

The firings follow a major hiring spree during the height of the coronavirus pandemic when companies scrambled to meet demand as people went online for work, shopping and entertainment.

Asked about the layoffs just ahead of the announcement, Microsoft CEO Satya Nadella said that "no one can defy gravity" and pointed to the high inflation that was affecting economic growth around the world.

Microsoft's filing to the US Securities and Exchange Commission said the cutbacks would result in a charge of $1.2 billion in their next results announcement.

Those are due on January 24 when the Redmond, Washington-based company is forecast to post its slowest revenue increase in years.

"As we saw customers accelerate their digital spend during the pandemic, we're now seeing them optimize their digital spend to do more with less," Nadella said in a note to employees, published by the SEC.

He said companies everywhere were exercising "caution as some parts of the world are in a recession and other parts are anticipating one."

Microsoft already made two rounds of layoffs, one in July, which affected less than one percent of the workforce, and a second one in October that targeted less than one thousand people, according to the news site Axios.

- Markets 'applaud' -

Nadella did not specify which departments would be hit by the new layoffs, but said the software giant "will continue to hire in key strategic areas," pointing to artificial intelligence as a key growth sector.

In addition to its software and cloud-computing divisions, Microsoft also owns professional network LinkedIn, search engine Bing and the Xbox video-game business.

The wave of firings in the tech sector have been rewarded by the stock market that had grown increasingly concerned about overspending by the US tech giants.

Meta's share price has shot up 35 percent since it announced 11,000 job cuts on November 9 and Amazon's stock was up more than 15 percent since 18,000 people were let go earlier this month.

Bucking that trend for now, Microsoft shares fell 1.9 percent Wednesday in the trading session following the layoffs announcement.

Microsoft, which according to its website currently has 221,000 employees worldwide, had hired 75,000 since 2019, analyst Dan Ives of Wedbush Securities said in a note.

He said that markets will "continue to applaud" the "rip the band-aid off" strategy amid tough economic conditions.

Analysts also said that the gloom would not divert Microsoft from an ambitious buyout strategy with a major bid to acquire gaming giant Activision under scrutiny by US and European regulators.

According to reports, Microsoft is also about to inject $10 billion into the Californian start-up OpenAI, which created the much hyped ChatGPT bot that can generate elaborate poems, essays or complex computer code in just seconds.