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The company said in a Securities deposit on Wednesday, making it the latest tech company to rethink hiring amid economic uncertainty.
Speaking ahead of the layoff announcement at the World Economic Forum (WEF) in Davos, Switzerland, on Wednesday, Microsoft CEO Satya Nadella said the company is not immune to a weak global economy.
“No one can defy gravity, and the attraction here is inflation-adjusted economic growth,” he told World Economic Forum founder Klaus Schwab in a live discussion.
in note Speaking to staff Wednesday, Nadella also cited changing years of demand for digital services to the pandemic as well as looming recession fears.
“We live in times of great change,” he wrote, “and as I meet with clients and partners, a few things are clear.” “First, as we’ve seen customers accelerate their digital spending during the pandemic, we’re now seeing them optimize their digital spending to do more with less.”
Microsoft had approximately 221,000 full-time employees globally as of June 30, 2022, according to a US Securities and Exchange Commission filing, with about 122,000 of those employees based in the United States.
Nadella said the job cuts represent less than 5% of the company’s total workforce and the cuts will be completed by the end of the third quarter of this fiscal year, which ends in March.
He said the company will accrue $1.2 billion in the second quarter of the year related to “termination costs, changes to our hardware portfolio, and the cost of consolidating leases.”
“These decisions are difficult, but necessary,” Nadella wrote.
Many tech companies have made deep cuts to their workforces since the start of the year, as inflation weighs on consumer spending and rising interest rates squeeze financing. Demand for digital services has also waned during the pandemic as people return to their offline lives.
(AMZN) It announced it planned to lay off 18,000 people and Salesforce said it would lay off 10% of its staff. Facebook
(FB) Meta’s parent company also recently announced 11,000 job cuts, the largest in the company’s history. In October, Axios reported that Microsoft had laid off less than 1,000 employees across several divisions.
CTOs from Meta Mark Zuckerberg to Salesforce’s Marc Benioff blamed themselves for overhiring early in the pandemic and misread how to quell a surge in demand for their products once Covid-19 restrictions eased.
While the overall job market remains tight, layoffs in the tech sector have escalated at an astonishing pace. A recent report from outsourcing firm Challenger, Gray & Christmas showed that tech layoffs rose 649% in 2022 over the previous year, compared to only a 13% increase in job cuts in the overall economy over the same period.
Microsoft will report its second quarter earnings on January 24th. The software company’s Azure cloud computing business led to revenue growth over the three months through September, as sales in its personal computing division fell slightly.
Even as Microsoft makes deep cuts, Nadella said the company will continue to invest in “strategic areas of our future” and cited advances in artificial intelligence as the “next major wave” of computing. His letter to employees comes amid rumors of a major investment from Microsoft in OpenAI, the company behind ChatGPT chatbot.