said in a blog post to employees Wednesday that the layoffs would affect less than 5% of the company’s global workforce.
Mr. Nadella pointed to the economic slowdown in his note, telling employees that companies globally had begun to “exercise caution as some parts of the world are in a recession and other parts are anticipating one.” He added that the company would be taking a $1.2 billion impairment charge in its soon-to-be-announced earnings related to severance costs.
In his note to employees, Mr. Nadella didn’t specify which parts of the company would be hit by the cuts, though he said that the company would continue to hire in key strategic areas.
The tech sector had been on a yearslong hiring spree as companies invested in expansion and competed for talent by offering lucrative pay packages. As Covid-19 set in, the pace of hiring accelerated as the companies rode a wave of supercharged demand.
Microsoft was among the tech companies that ramped up hiring in recent years. The company reported 221,000 employees at the end of its fiscal year through June. That was up 22% from the previous year.
Some tech companies have in recent months pivoted to slashing thousands of positions as the business climate has deteriorated on the back of economic slowdown concerns, high inflation rates, rising interest rates and other factors.
Tech employers cut more than 150,000 jobs in 2022, estimates Layoffs.fyi, a website that tracks the events as they surface in media reports and company releases.
said was laying off 284 employees. The provider of tools for creating videogames and other applications had earlier announced layoffs in June when it cut around 225 jobs.
Microsoft’s move comes the week before it is scheduled to announce its latest quarterly earnings. Late last year, the Redmond, Wash., company said a sharp decline in personal computer sales and the dollar’s strength were weighing on expansion. In the three months through September, its revenue grew 11% from a year earlier, its weakest increase in more than five years.
The issue of declining PC sales that has been squeezing Microsoft’s Windows business looks to be around for some time. Worldwide shipments were down 29% in the fourth quarter last year compared with the previous year, according to preliminary data from research firm
Analysts don’t expect that trend to improve until 2024.
Microsoft shares have slipped 23% over the past 12 months, broadly in line with the tech-heavy Nasdaq Composite Index which fell 26%. Microsoft has fared better than many of the consumer-facing tech leaders.
has lost around 35% in the past year. Amazon shares have fallen around 40%.
The lion’s share of Microsoft’s business is selling software and cloud services to corporations. That enterprise business hasn’t so far been as hit as hard as the businesses which depend on e-commerce and selling advertising.