In an effort to save $1 billion in costs, tech giant Microsoft announced on Wednesday January 18 that it will eliminate close to 10,000 jobs, or about 5% of its staff, by the end of the third quarter of fiscal 2023.
Microsoft had employed more workers during the COVID-19 pandemic as it responded to a boom in demand for its workplace software and cloud computing services with so many people working and studying from home.
“A big part of this is just overexuberance in hiring,” said Joshua White, a finance professor at Vanderbilt University.
In the two fiscal years that followed the pandemic’s emergence, Microsoft’s employment increased by nearly 36%, going from 163,000 employees at the end of June 2020 to 221,000 at the end of June 2022.
According to CEO Satya Nadella in an email to employees, the layoffs represent “less than 5 percent of our total employee base, with some notifications happening today”.
“While we are eliminating roles in some areas, we will continue to hire in key strategic areas,” Nadella said.
He underlined the significance of building a “new computer platform” exploiting developments in artificial intelligence.
Customers that increased their digital technology spending during the pandemic, according to him, are now attempting to “optimize their digital spend to do more with less.”
“We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one,” Nadella wrote.
In response to worries about an economic slowdown, other tech companies have also been laying off employees.
In an effort to trim payrolls that quickly grew during the pandemic lockdown, Salesforce, a maker of business software, and Amazon both announced significant employment layoffs earlier this month.
Nadella made no direct mention of the layoffs on Wednesday when he put in an appearance at the World Economic Forum’s annual meeting happening this week in Davos, Switzerland.
At the annual conference of the World Economic Forum taking place this week in Davos, Switzerland, Nadella did not address the layoffs when he made an appearance on Wednesday.
Nadella responded that businesses that grew rapidly during the COVID-19 pandemic are now witnessing “normalization” of that demand when asked by the forum’s founder Klaus Schwab on what tech layoffs meant for the industry’s business model.
“Quite frankly, we in the tech industry will also have to get efficient, right?”
“It’s not about everyone else doing more with less. We will have to do more with less. So we will have to show our own productivity gains with our own sort of technology”. Nadella said.
Microsoft declined to answer questions about where the layoffs and office closures would be concentrated. The company sent notice to Washington state employment officials Wednesday that it was cutting 878 workers at its offices in Redmond and the nearby cities of Bellevue and Issaquah.
Author-Roberta Appiah
