Microsoft to axe up to 18 000 staff

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br nadella

Bloomberg

Chief executive Satya Nadella is integrating Nokia's unit. Photo: Bloomberg

Seattle - Microsoft would eliminate as many as 18 000 jobs, the largest round of cuts in its history, the software maker said yesterday, as chief executive Satya Nadella integrates Nokia’s handset unit and slims down the company.

The restructuring, amounting to about 14 percent of its workforce, included 12 500 factory and professional positions, the world’s biggest software maker said.

The job cuts were expected to be completed by the end of June next year, and would result in pretax charges of between $1.1 billion (R12bn) and $1.6bn.

Nadella, who took over from Steve Ballmer in February, is retooling the company’s structure as it seeks to compete with nimbler rivals offering mobile and internet-based software and services.

He is also working to wring a promised $600 million in annual savings from Microsoft’s Nokia deal, which added about 30 000 workers in April, bringing the total workforce to about 127 100.

“Microsoft needs to be a leaner tech giant over the coming years in order to strike the right balance of growth and profitability around its cloud and mobile endeavours,” Daniel Ives, an analyst at FBR Capital Markets, said.

In his first mission statement, Nadella said last week that the software maker needed to become more focused and efficient and required changes to its engineering teams. He pledged updates on the new plans later this month, and said he would provide more details when the company reported earnings next week.

Ives said Microsoft investors were likely to view the cuts as a positive sign, illustrating that Nadella was trying to get costs and headcount under control and that he understood the challenges facing the company.

“We view this as another step in the right direction from the Street’s perspective,” he said. “Nadella is not wearing rose-coloured glasses.”

In appearances at company and technology events since he took the helm, Nadella has reiterated that the company’s priorities were mobile and cloud products, as he works to shift Microsoft away from its longtime core business of software for personal computers.

Nadella has signalled a desire to produce software for rival operating systems, such as Apple’s iOS and Google’s Android, and has shuffled management in areas like marketing, business development and the Xbox game console.

When Microsoft agreed to acquire Nokia’s device unit in September last year, the software maker pledged $600m in annual cost savings in the 18 months after the deal closed. People with knowledge of the matter have said that honouring that commitment would probably involve job cuts.

As the technology industry increasingly shifts towards mobile computing and cloud-based services, other technology firms have also sought to keep up by streamlining and firing workers. After posting an 11th quarter of falling sales in May, Hewlett-Packard disclosed 16 000 more job cuts, on top of 34 000 in staff reductions already announced. – Bloomberg


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