Microsoft Slicing 18,000 Jobs: More Change Ahead
Microsoft announces largest layoff in its history as it
restructures and integrates recently acquired Nokia devices unit. CEO Satya
Nadella promises sweeping organizational changes.
Microsoft will slash 18,000 jobs from its payroll during
the next 12 months, the company announced on Thursday, with the majority of the
cuts to occur by the end of the year.
The headcount reduction, which amounts to roughly 14% of
Microsoft's global workforce, is the largest in company history. Roughly 12,500
of the eliminated positions will come from integrating Microsoft's recently
acquired Nokia Devices and Services Division; the deal to buy Nokia closed in
April. Microsoft had more than 127,000 employees worldwide as of the beginning
of June.
"Our workforce reductions are mainly driven by two
outcomes: work simplification as well as Nokia Devices and Services integration
synergies and strategic alignment," Microsoft CEO Satya Nadella told
employees in an email. Microsoft EVP Stephen Elop, who joined the company as
part of the Nokia acquisition, sent a separate email to Microsoft Devices
staff.
Nadella's recent public comments, including a
company-wide memo and his keynote address at Microsoft's Worldwide Partner
Conference, have continued to lay out his course for Microsoft's near- and
long-term future. That direction includes a considerable reshaping of
predecessor Steve Ballmer "devices and strategies" mantra to
"productivity and platform," with the former term especially becoming
a touchstone for Nadella's vision and team.
If you take Nadella at his word, the job cuts aren't
simply a cost-cutting measure, as is sometimes the case in corporate
downsizings, but a first step toward sweeping changes to how Microsoft
operates.
"First, we will simplify the way we work to drive
greater accountability, become more agile, and move faster. As part of
modernizing our engineering processes the expectations we have from each of our
disciplines will change," Nadella wrote in his email. That shift, even
broadly described, makes sense given Microsoft's recent "mobile-first,
cloud-first" drumbeat: if you want to sing that refrain, the development
and testing cycles of the shrink-wrapped software of yore won't cut it.
It would appear, too, that the job cuts won't all come
from the trenches. Nadella indicated Microsoft's org chart may look quite
different by this time next year: "We plan to have fewer layers of
management, both top down and sideways, to accelerate the flow of information
and decision making," he wrote. "This includes flattening
organizations and increasing the span of control of people managers."
In his own email, Elop outlined changes to devices
strategy and operations, with most of the changes coming to phones, including a
consolidation of the Smart Devices and Mobile Phones units into a single phone
division. In previewing the upcoming restructuring, Elop noted that while
phones were the business previously at Nokia, they're only part of the business
at Microsoft. Microsoft intends to drive Windows Phone adoption in the near
term by targeting the rapidly growing market for lower-priced devices with its
Lumia devices. It will also redirect select Nokia X devices to the affordable
phone market.
On the higher end of the smartphone market, Elop said,
"We will focus on delivering great breakthrough products in alignment with
major milestones ahead from both the Windows team and the Applications and
Services Group."
Nadella told Microsoft employees that, in spite of the
deep cuts, "we will be adding roles in other strategic areas," though
he didn't offer specifics.
Microsoft said it expects to take pre-tax charges related
to the restructuring of up to $1.6 billion over the next four quarters,
including between $750 and $800 million in severance and benefits costs from
the staff reduction. The layoffs will be completed by June 30, 2015, with most
of the cuts occurring much sooner, according to the company.
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