U.S. tech giant Microsoft is set to lay off 18,000 employees, according to an internal memo from its new CEO. Satya Nadella, who took over the reigns from longterm chief Steve Ballmer in February, admitted that Microsoft needs to be “leaner” alongside more streamlined rivals such as Apple and Google, Inc.
Nadella added that the biggest hit would be felt at Nokia, the communications firm Microsoft acquired for $7.2bn this April. The cuts – which represent 14 % of Microsoft’s 127,000-strong workforce, will include 12,500 Nokia factory and professional positions, half the number added to the payroll in April.
A total of 1,351 jobs will be lost in the U.S. city of Seattle, while another 1,000 are expected to go in Nokia’s home country of Finland, including the shuttering of its R&D facility in the northern city of Oulu. Microsoft operations in Beijing and San Diego will also be affected. The move represents the largest job loss since Microsoft’s founding in 1975.
“The first step to building the right organization for our ambitions is to realign our workforce,” wrote Nadella on Monday (July 14). The India-born chief promised more details when he announces Microsoft’s quarterly earnings on July 22.
The cull comes as little surprise to many in the industry. When April’s deal concluded, Microsoft claimed it would trim costs by $600 million per year within 18 months. Insiders have also pointed out Nokia’s lacklustre attempts to keep its foothold in the mobile market next to Apple’s iPhone and Google Inc.’s Android.
Ahead of April’s deal, Nokia’s chairman, founder and CEO Risto Siilasmaa admitted he had been suffering sleepless nights over the company’s financial losses.
In addition to the job losses, Sabella announced that Nokia’s Lumia product line will now run on Microsoft’s Windows OS, as opposed to an initial plan to run Google’s Android. “This builds on our success in the affordable smartphone space, and aligns with our focus on Windows Universal Apps,” he wrote.
Nadella, a Microsoft veteran who had helmed its cloud computing division before taking over from 14-year CEO Ballmer, thinks the Nokia acquisition was “a big mistake” according to Business Insider’s Steve Kovach, who adds that Nadella has been left to clean up Ballmer’s “mess”. Founder and chairman Bill Gates stressed that there is “no-one better” to lead Microsoft, in the wake of this week’s news.
The numbers appear to agree. Microsoft posted better-than-expected net profits of $5.7bn in April. At time of going to press its shares were stable at $44.53, after a yearly high of $45.30 yesterday. Nokia’s shares were also stable at $7.38, from a high of $8.18 in January.
Even without the job losses, Microsoft remains far behind the world’s largest private employer, American retailer Walmart, which counts some 2.1 million staff on its books.