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Microsoft's historic layoff - 18k people, 15% of staff

Vast majority will be cut from Nokia, which Microsoft bought in 2013

Financial trends and news by Steven Loeb
July 17, 2014 | Comments
Short URL: http://vator.tv/n/3832

We all knew they were coming, but this is just brutal. Absolutely brutal.

It's been in the cards for a while now that Microsoft would have to cut a slew of jobs, with most predicting that the number would fall between 5% or 10%, or 12,700. That's no small amount of people.

Now we know the real number: Microsoft announced Thursday that a total of 18,000 will lose their jobs over the next year. That comes out to be 15% of the company's global workforce.  

As expected, the vast majority of the people cut will be from Nokia. Microsoft announced it was buying Nokia for $7.17 billion back in September of last year; the deal finally closed in April, at a slightly higher price. As with any merger of this kind, there is going to be some overlap between employees of the two companies, so now 12,500 Nokia workers are getting a pink slip.

In a letter sent out to his employees, Satya Nadella, who became Microsoft's third-ever CEO in February of this year, said that the company is moving to eliminate the first 13,000 jobs quickly, and that, "the vast majority of employees whose jobs will be eliminated will be notified over the next six months."

"My promise to you is that we will go through this process in the most thoughtful and transparent way possible" he wrote. "We will offer severance to all employees impacted by these changes, as well as job transition help in many locations, and everyone can expect to be treated with the respect they deserve for their contributions to this company."

In all, those severance packages will cost Microsoft between $1.1 and $1.6 billion over the next year, including between $750 and $800 in severance and related benefit costs, and another $350 million to $800 million in asset-related charges. 

To put into perspective just how massive a purge this is, you should know that the number of people being fired it most than triple the number in the company's former record: the 5,800 people who lost their jobs back in 2009.

It should also be pointed out that, while we know where most of the jobs will be coming from, that still leaves another 5,500 people who are now in fear for their jobs. Other places that it has been previously speculated that jobs could be lost include the XBox division, specifically its European division, located in Reading in the United Kingdom, and some software testers. 

VatorNews has reached out to Microsoft for more information about these other job cuts, but a company spokesperson could not comment on which other divisions would be seeing cuts. 

Like I said, it  is not surprising that these cuts were made, just the sheer number of them. Nadella had made it pretty clear that he was planning to make Microsoft leaner and more efficient. In a lengthy blog post he posted a week ago, consisting of 3,100 words, Nadella, for the first time, laid out his vision for the future of the company: specifically that it should be able to be competitive in a "mobile-first and cloud-first world."

"We will increase the fluidity of information and ideas by taking actions to flatten the organization and develop leaner business processes. Culture change means we will do things differently. Often people think that means everyone other than them. In reality, it means all of us taking a new approach and working together to make Microsoft better," he wrote.

"To this end, I've asked each member of the Senior Leadership Team to evaluate opportunities to advance their innovation processes and simplify their operations and how they work."

(Image source: historymartinez.wordpress.com)

 


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