microsoft said Wednesday that the software maker will lay off 10,000 employees by March 31 as it braces for slowing revenue growth. It has a negative impact of 12 cents on earnings per share.
alphabet, Amazon When Salesforce is one of the tech companies to cut headcount in recent weeks. The contraction comes after increased demand for cloud computing and collaboration services as businesses, government agencies and schools encouraged remote work to reduce exposure to COVID-19.
Rising prices have forced companies to pay more attention to their technology investments, undermining the prospects of tech stocks, which have outperformed other market sectors every year. Currently, Microsoft and its peers are looking at inventory. Microsoft said he would cut less than 1% of his workforce in July, and in October confirmed additional job cuts that allegedly affected less than 1,000 employees.
“We are confident that Microsoft will emerge from this stronger and more competitive one,” Chief Executive Satya Nadella told employees in a memo posted. on the Microsoft websiteThe move will cut Microsoft’s workforce by less than 5%, and some employees will know if they will lose their jobs this week, he wrote.
After the announcement, Microsoft shares edged higher at the US Open.
Workforce adjustments will affect all teams and regions, with a greater impact on sales and marketing than engineering, a company spokesperson told CNBC in an interview.
Eligible U.S. employees will receive above-market retirement benefits, six months of healthcare and stock vesting, and 60 days’ notice of termination, Nadella wrote.
Nadella reiterated trends in the business environment he described in recent months.
“Just like we saw our customers accelerate their digital spending during the pandemic, we are now optimizing our digital spending to do more with less,” he said. writes. “We also know that organizations in all industries and regions are paying attention as some parts of the world are in recession and others are expected to be in recession.”
Nadella suggested earlier this month that the company may need to make changes.
“I don’t think we, as a global company, are immune from what’s happening at the macro level,” he said. interview on CNBC-TV18. “We also need to have our own operational focus to make sure our expenses are aligned with our revenue growth.”
Microsoft is seeking 2% revenue growth in the second quarter of the fiscal year, the slowest pace since 2016.
Gil Luria, a DA Davidson analyst with a buy rating on Microsoft stock, said the job cuts aren’t a big surprise given Microsoft’s cloud infrastructure and Windows operating system sales have been declining over the past several quarters. , said.
Investors are very concerned about the margins of many tech companies, including Microsoft, he told CNBC in an interview.
“All of these companies, especially those that have hired more staff in the last two to three years, need to adapt and respond to an environment of slower growth, with the discipline investors need and the focus on shareholder value. I think there was a broader expectation to show, something we feel now as we navigate an economy of slowing growth,” Luria said.
Evercore ISI analysts have a rating equivalent to a buy rating on Microsoft stock, wrote in a memo to clients.
Massive layoffs at 47-year-old Microsoft don’t happen every year, but they do happen from time to time. In 2017, Microsoft laid off thousands of employees in a major restructuring of its sales division. In 2014, following the acquisition of Nokia’s devices and services business, Microsoft 18,000 cuts Man. The cuts Microsoft announced Wednesday were the biggest since Nokia’s layoffs, said a spokesperson.
Nadella said the claims relate to severance payments, changes to the company’s hardware lineup, and leasing consolidation costs, with Microsoft allocating personnel and funds to growth areas and making divestments in other categories. pointing out that there is
“In order to deliver meaningful innovation that our customers, communities and countries can truly benefit from, each of us and every team across the company will raise the bar and outperform our competitors,” said Nadella. “If we do this, we will be stronger and we will thrive well into the future.It is as simple as that.”
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