Microsoft fires off 10000 employees as job losses in the technology sector continue to spread

By Maggie On Jan 18, 2023

Microsoft fires off 10000 employees as job losses in the technology sector continue to spread; Microsoft is slashing 10,000 jobs, or about 5% of its staff, as with other software firms due to the current pandemic.

In a filing with regulators on Wednesday, the business said the layoffs were caused by “macroeconomic factors and shifting customer demands.”

The software behemoth headquartered in Redmond, Washington, has announced that it would combine its leased office sites and modify its hardware line.

Microsoft, which saw a surge in demand for its office software and cloud computing services as more people began working from home or attending school online, is laying off many fewer workers than it had hired during the COVID-19 pandemic.

Professor of Finance at Vanderbilt University Joshua White has speculated that “overexuberance in hiring” is to blame.

Over the two fiscal years following the pandemic’s appearance, Microsoft’s workforce grew by around 36%, from 163,000 at the end of June 2020 to 221,000 in June 2022.

CEO Satya Nadella informed staff via email that “less than 5 percent of our total employee base” would be affected by the layoffs, with some notices already being sent out.

Despite “job eliminations” in some departments, “we will continue to employ in important strategic areas,” Nadella assured. The importance of developing a “new computer platform” with the help of AI was underlined.

He added that customers who increased their investment in digital technology in the face of the epidemic are now attempting to “optimize their digital spend to accomplish more with less.”

While some parts of the world are experiencing a recession, others are bracing for one, causing enterprises in all sectors and regions to proceed with prudence, Nadella said.

Several other IT firms have also begun laying off workers as the economy has slowed.

Early this month, both Amazon and the commercial software company Salesforce announced large-scale layoffs to reduce staffing levels that had ballooned during the pandemic lockdown.

About 18,000 jobs will be lost at Amazon, the company stated. Despite only accounting for a small percentage of the company’s 1.5 million employees worldwide, it is the most significant round of layoffs in the Seattle firm’s history.

Meta, Facebook’s parent company, is cutting 11,000 jobs, or nearly 13% of the staff. New Twitter CEO Elon Musk has also reduced the company’s team.

Nadella attended the World Economic Forum’s annual gathering in Davos, Switzerland, this week, but he didn’t discuss the layoffs by name.

Nadella responded to a question from the forum’s founder, Klaus Schwab, about the impact of layoffs on the business model of the IT industry by saying that companies whose revenue surged during the COVID-19 outbreak are now experiencing a “normalization” of that demand.

The tech industry as a whole will have to improve its productivity. Said Nadella. It’s not a matter of forcing everyone to make do with less. We will need to maximize our efforts despite significant resource constraints. Therefore, we must demonstrate our productivity increases using our brand of technology.

Microsoft did not immediately answer when asked where the bulk of the layoffs and office closures will occur. It had 122,000 employees in the United States as of June and another 99,000 in other countries.

Professor White from Vanderbilt stated that all sectors are trying to save money in anticipation of a recession. However, tech firms may be more vulnerable because of the Federal Reserve’s aggressive use of interest rate hikes to combat inflation in recent months.

A large percentage of Microsoft’s value relies on projects with cash flows that won’t pay off for several years, so “this impacts computing businesses a little harder than it does industrials or consumer staples,” he said.

Microsoft’s investment in San Francisco firm OpenAI, creator of the writing tool ChatGPT and other artificial intelligence systems that can generate intelligible text, graphics, and computer code, is one of the initiatives that has been gaining a lot of attention recently.

Microsoft, the owner of the Xbox gaming division, is experiencing regulatory uncertainties in the United States and Europe, which is delaying the company’s $68.7 billion acquisition of Activision Blizzard, which employed roughly 9,800 people as of a year ago.