Microsoft will cut 10,000 jobs as the tech gloom deepens

A building with Microsoft offices in Chevy Chase, Maryland, January 18, 2023 (Photo by Saul Loeb/AFP)

by Alex Pigman
Agence France-Media

WASHINGTON, US (AP) — Microsoft said Wednesday it will lay off 10,000 employees in the coming months as the economic downturn continues to punish the US tech giants.

The job cuts will affect just under five percent of employees and will follow in the wake of similar moves by Facebook owner Meta, Amazon and Twitter that have announced thousands of layoffs in the previously irreplaceable technology sector.

The Windows manufacturer said in a US regulatory filing that the cuts were “in response to macroeconomic conditions and changing customer priorities.”

The layoffs follow a major hiring wave during the height of the coronavirus pandemic when companies scrambled to meet demand as people went online for work, shopping and entertainment.

Asked about the layoffs ahead of the announcement, Microsoft CEO Satya Nadella said that “no one can defy gravity” and pointed to the high inflation affecting economic growth around the world.

Microsoft’s report to the US Securities and Exchange Commission said the cuts would result in a cost of $1.2 billion in the next results announcement.

Those dues are due on January 24 when the Redmond, Washington-based company is expected to post its slowest revenue increase in years.

“As we’ve seen customers accelerate their digital spending during the pandemic, we’re now seeing them optimize their digital spending to get more done with less,” Nadella said in a memo to employees, published by the SEC.

He said companies everywhere are being cautious because some parts of the world are in a recession and other parts are anticipating a recession.

Microsoft has already made two rounds of layoffs, one in July that affected less than one percent of the workforce, and another in October that targeted fewer than 1,000 people, according to news site Axios.

– Applause for the markets –
Nadella did not specify which departments would be affected by the new layoffs, but said the software giant will “continue hiring in key strategic areas,” citing artificial intelligence as a key growth sector.

In addition to its software and cloud computing divisions, Microsoft also owns the professional network LinkedIn, the Bing search engine, and the Xbox video game business.

The shooting spree in the tech sector has been rewarded by a stock market that has grown increasingly anxious about excessive spending by US tech giants.

Meta’s stock price is up 35 percent since it announced 11,000 job cuts on November 9, and Amazon stock is up more than 15 percent since shedding 18,000 people earlier this month.

Bucking the trend for the time being, Microsoft shares fell 1.9 percent Wednesday in post-layoff trading.

Analyst Dan Ives of Wedbush Securities said in a note that Microsoft, which according to its website currently has 221,000 employees worldwide, has hired 75,000 since 2019.

He said markets will “continue to applaud” the “band-aid” strategy amid difficult economic conditions.

Analysts also said the gloom wouldn’t divert Microsoft from an ambitious buying strategy with a big bid to get gaming giant Activision under scrutiny from US and European regulators.

According to reports, Microsoft is about to pour $10 billion into California startup OpenAI, which has created a much-touted ChatGPT bot that can generate poems, articles, or complex computer code in just seconds.

© AFP

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