Microsoft to axe 18,000 jobs as Satya Nadella cuts deeper than expected

By Graeme Burton
17 Jul 2014 View Comments
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Microsoft CEO Satya Nadella has announced drastic job cuts at the software giant, with 18,000 redundancies across the world - many more than expected after his memo last week hinted at a restructuring.

The job losses are the biggest in the company's history and will fall hardest on the Nokia mobile phone business it acquired last year, where 12,500 staff will lose their jobs. That deal was completed in April and came with approximately 30,000 staff worldwide

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Nadella described the job losses as "difficult, but necessary" in his announcement to staff. In a rambling open memo published last week, Nadella gave a coded warning of the job cuts and restructuring that were on the way.

In it, he suggested that the company needed to re-focus from software sales to cloud services, apps and devices. Microsoft earns the lion's share of its revenues and profits from operating systems and office applications, leaving it vulnerable to a forecast shift to the cloud, particularly in the enterprise market.

The job cuts represent some 14 per cent of the company's total workforce, which were boosted to more than 127,000 after the Nokia acquisition. 

The cuts will mean a pre-tax charge of between $1.1bn and $1.6bn in the Seattle-based software giant's 2015 financial year, which began this month.

In addition to Nokia, which will account for two-thirds of the cuts due to wide overlaps between Nokia and Microsoft's existing Windows Phone division, the Xbox division is also expected to bear the brunt of the job losses, particularly in marketing.

There are also expected to be changes to engineering at the company, with teams that have traditionally been split between program managers, developers and testers, to now be amalgamated.

In an interview last week following publication of the memo, Nadella said that it made sense for developers to test and fix their own bugs using automated tools and cloud-based methods, instead of employing separate teams.

Nadella will reveal more details about the company's restructuring when he announces the company's fourth quarter and full-year results on 22 July next week.

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