17 july 2014
In a statement released Thursday, Microsoft says about 12,500 of the professional and factory positions will be cut as part of its $7 billion acquisition of Nokia’s handset business, which the company closed in April.
“My promise to you is that we will go through this process in the most thoughtful and transparent way possible,” said Nadella in a memo to employees.
Nadella, who replaced Steve Ballmer in February, says the “vast majority” of employees affected by layoffs will be notified within the next six months. They will also earn severance and job transition help in many locations. All cuts will be completed by next June.
The layoffs by Microsoft — which employs 125,000 people — are the company’s largest since 2009, when they cut more than 5,000 jobs.
Daniel Ives, analyst with FBR Capital Markets, says the “larger than expected” layoffs hints at Nadella’s plans to simplify Microsoft’s infrastructure.
“Under the Ballmer era, there were many layers of management and a plethora of expensive initiatives being funded that has thus hurt the strategic and financial position the company is in, especially in light of digesting the Nokia acquisition,” says Ives. “Nadella is using today as an opportunity to make sure that Microsoft is ready and well positioned to embark on its next chapter of growth around mobile and cloud.”
Microsoft expects to incur pre-tax charges as high as $1.6 billion over the next four quarters, which will include $750 million to $800 million for severance and related benefit costs, and $350 million to $800 million of asset-related charges.
Shares of Microsoft were up 3.3% at $45.55 in pre-market trading. Overall, investors have been pleased by Nadella’s performance. Microsoft stock surged 25% since Nadella took over in February.
Last week, Nadella sent a memo to employees reinforcing his vision for a “mobile-first, cloud-first” world, focusing on unifying its software and hardware.
“Microsoft has a unique ability to harmonize the world’s devices, apps, docs, data and social networks in digital work and life experiences so that people are at the center and are empowered to do more and achieve more with what is becoming an increasingly scarce commodity — time!” said Nadella.
Nadella has used his five months at the CEO helm to start reshaping Microsoft into a more nimble tech company targeting cloud computing and mobile. Earlier this year, the company launched the Surface Pro 3 tablet, and launched its productivity software Office on Apple’s iPad tablet.