Microsoft Corp is cutting 10,000 workers, almost 5 percent of its workforce, joining other tech companies that have scaled back their pandemic-era expansions.
The company on Wednesday said in a regulatory filing that the layoffs are a response to “macroeconomic conditions and changing customer priorities.”
The software giant based near Seattle said it would also be making changes to its hardware portfolio and consolidating its leased office locations.
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Microsoft is cutting far fewer jobs than it had added during the COVID-19 pandemic, when it responded to a boom in demand for its workplace software and cloud computing services that allowed many people to work and study from home.
“A big part of this is just over-exuberance in hiring,” Vanderbilt University finance professor Joshua White said.
Microsoft’s workforce expanded by about 36 percent in the two fiscal years following the emergence of the pandemic, growing from 163,000 workers at the end of June 2020, to 221,000 in June last year.
The layoffs represent “less than 5 percent of our total employee base, with some notifications happening today,” CEO Satya Nadella said in an e-mail to employees.
“While we are eliminating roles in some areas, we will continue to hire in key strategic areas,” Nadella said.
The e-mail discussed the importance of building a “new computer platform” using advances in artificial intelligence.
He said customers that were accelerating their spending on digital technology during the pandemic are now trying 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.
Other tech companies have also been trimming jobs amid concerns about an economic slowdown.
Amazon.com Inc and business software maker Salesforce.com Inc earlier this month announced major job cuts as they prune payrolls that rapidly expanded during the pandemic lockdown.
Nadella made no direct mention of the layoffs when he appeared on Wednesday at the World Economic Forum’s annual meeting happening this week in Davos, Switzerland.
When asked by forum founder Klaus Schwab what tech layoffs mean for the industry’s business model, Nadella said companies that boomed during the COVID-19 pandemic are now seeing “normalization” of that demand.
“We in the tech industry will also have to get efficient, right?” Nadella said. “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.”
White said all industries are looking to cut costs ahead of a possible recession, but tech companies could be particularly sensitive to rapidly rising interest rates, a tool that has been used aggressively in recent months by the US Federal Reserve in its fight against inflation.
“This hits tech companies a little harder than it does industrials or consumer staples because a huge portion of Microsoft’s value is on projects with cash flows that won’t pay off for several years,” he said.
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