Microsoft cutting 18,000 jobs, 14% of company, in largest layoffs in its history

microsoftlogo1-1024x680Microsoft will cut 18,000 jobs over the next year, including 12,500 related to its acquisition of Nokia’s Devices and Services business, the company confirmed this morning.

The overall figure represents about 14 percent of the 127,000 people employed by the company as of last month.

It’s the largest job reduction in the company’s history — a major move by new Microsoft CEO Satya Nadella intended, in part, to streamline the way Microsoft develops products and runs its engineering teams.

The company says it will incur pretax charges of $1.1 billion to $1.6 billion related to severance and benefit costs.

Microsoft is starting with 13,000 cuts today, and more will be made over the next year to bring the total to 18,000. About 1,351 positions will be cut in the Seattle region as part of that first wave, representing about 3 percent of the company’s workforce in the region.

Satya Nadella

Satya Nadella

Nadella says in an email to employees that the company will have “fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making.”

He explains, “This includes flattening organizations and increasing the span of control of people managers. In addition, our business processes and support models will be more lean and efficient with greater trust between teams. The overall result of these changes will be more productive, impactful teams across Microsoft.”

Based on what we’re hearing from inside the company, Microsoft’s Operating Systems division, including Windows, will be slightly harder hit by the first wave of cuts than the company’s Cloud & Enterprise and Online Services divisions, which have already taken some steps to align with Nadella’s vision for streamlined engineering.

In a separate email message, Microsoft devices leader Stephen Elop outlines the changes that will take place in the company’s smartphone and mobile devices unit, including a plan to stop using Android for the company’s future Nokia X lineup, shifting to Windows Phone instead.

We’ve asked if any executives are leaving as part of the changes, and the company says it isn’t making any announcements along those lines today.

Investors appears to like Nadella’s moves. Microsoft shares are up more than 3 percent in early trading.

Developing, more to come. Continue reading for Nadella’s full email.

From: Satya Nadella

To: All Employees

Date: July 17, 2014 at 5:00 a.m. PT

Subject: Starting to Evolve Our Organization and Culture

Last week in my email to you I synthesized our strategic direction as a productivity and platform company. Having a clear focus is the start of the journey, not the end. The more difficult steps are creating the organization and culture to bring our ambitions to life. Today I’ll share more on how we’re moving forward. On July 22, during our public earnings call, I’ll share further specifics on where we are focusing our innovation investments.

The first step to building the right organization for our ambitions is to realign our workforce. With this in mind, we will begin to reduce the size of our overall workforce by up to 18,000 jobs in the next year. Of that total, our work toward synergies and strategic alignment on Nokia Devices and Services is expected to account for about 12,500 jobs, comprising both professional and factory workers. We are moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months. It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas. My promise to you is that we will go through this process in the most thoughtful and transparent way possible. We will offer severance to all employees impacted by these changes, as well as job transition help in many locations, and everyone can expect to be treated with the respect they deserve for their contributions to this company.

Later today your Senior Leadership Team member will share more on what to expect in your organization. Our workforce reductions are mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment.

First, we will simplify the way we work to drive greater accountability, become more agile and move faster. As part of modernizing our engineering processes the expectations we have from each of our disciplines will change. In addition, we plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making. This includes flattening organizations and increasing the span of control of people managers. In addition, our business processes and support models will be more lean and efficient with greater trust between teams. The overall result of these changes will be more productive, impactful teams across Microsoft. These changes will affect both the Microsoft workforce and our vendor staff. Each organization is starting at different points and moving at different paces.

Second, we are working to integrate the Nokia Devices and Services teams into Microsoft. We will realize the synergies to which we committed when we announced the acquisition last September. The first-party phone portfolio will align to Microsoft’s strategic direction. To win in the higher price tiers, we will focus on breakthrough innovation that expresses and enlivens Microsoft’s digital work and digital life experiences. In addition, we plan to shift select Nokia X product designs to become Lumia products running Windows. This builds on our success in the affordable smartphone space and aligns with our focus on Windows Universal Apps.

Making these decisions to change are difficult, but necessary. I want to invite you to my monthly Q&A event tomorrow. I hope you can join, and I hope you will ask any question that’s on your mind. Thank you for your support as we start to take steps forward in evolving our organization and culture.

Satya

 

  • As I See It

    Bloomberg reporter says: ‘At the same time, excluding Nokia, just Microsoft alone, the cut is 5,500, so less than 2009′s 5,800 job cuts.’

    • http://geekwire.com Todd Bishop

      Technically true, with that modifier, but overall still the largest in the company’s history. The 12,500 Nokia-related cuts are significant, about half of the positions that came with that acquisition.

    • http://www.extendedresults.com/ Patrick Husting
  • FormerSoftie

    Interesting that the first wave will be notified over the next 6 months. Microsoft leadership is probably hoping some/many will voluntarily leave in that period so as to avoid paying severance. Surely will be a fun 6 months for employees to work with a sword dangling above their heads….

    • Dave

      The problem is that those who leave Microsoft are often the best performers, not the worst. Hopefully they take steps to keep the high quality performers who have plenty of options. I’m sure Amazon’s recruiters are kicking into high gear again looking for dev talent.

  • http://www.extendedresults.com/ Patrick Husting

    Most are in Nokia, that really doesn’t address the middle layer of management he mentions. There are a lot of people in middle management.

    I can understand getting rid of way under performers. But really it is about giving people a vision and unchaining them to work on that vision. It is not about kissing butt and doing a bunch of busy work that results in nothing (meetings and powerpoints) and then having your 10 vendors do the work for you.

  • Dave

    It is roughly half the Nokia employees, which makes sense. It will be interesting to see if some of those are simply moving pieces around the chess board in a rational way, such as outsourcing manufacturing to a third party by selling the plants in which case many of those employees could still keep their jobs. Also says that Satya wasn’t enamored of the Nokia acquisition or at least the price paid since massive cost synergies were never cited as a reason for doing the deal.

    It is only a little over 5% of the core Microsoft base which still seems light if the goal is streamlining middle management. 5% is less than an ordinary performance improvement/annual review cycle at most high performing companies. If he really wants to streamline the company, then this is the first of many cuts.

    It will also be interesting to see the net impact over the year. The big 5,800 RIF a few years ago was heavily offset by other hiring and a lot of internal people moving to other groups. It did not really upgrade the talent base.

  • Dave

    Todd,

    Do you remember the net impact of the last big Microsoft cuts? I thought it ended up much smaller, basically a harsh performance review cycle by the time it was all said and done. Lots of angst, but by the time the internal moves were settled much less impactful than had been originally presented.

    Is Microsoft’s annual review cycle starting now following the end of their fiscal year? Seems like 5% of the non-Nokia workforce could be identified fairly easily with a decent performance review cycle.

    Satya is making a point about reorganizing and streamlining but Microsoft’s culture has proven pretty resistant to actually making big changes. Good on the showy, CEO, PowerPoint version, less on the reality as managers horse trade to save heads. Hopefully Satya can change that.

    Thank you

  • http://www.bellevuefineart.com/ panacheart

    Perfect timing, just before the review cycle. This fiscal year’s year end reviews are going to be brutal for those on the chopping block. But the impact to the Puget Sound looks rather minimal.

    • http://www.extendedresults.com/ Patrick Husting

      I know several people that were managed out over the past 3 months. I guess those are not included in the head count.

  • geekophobe

    Former softie too. Left after collecting my stock grant a year ago. Sure glad I made the move when I did. I hope Nadella can streamline the company and change the culture. It was sure a toxic political hellhole when I worked there. I hope my former managers that made my life miserable get whacked. It would also be nice to think that somewhere in the group being laid off are some H1-Bs that are now going to have to pack their bags and head back to Mumbai or Cairo or whatever $hith0le they came from.

    Today I am going to enjoy and bask in the warm glow of schadenfreude.

  • jay

    Hopefully it’ll be more straightforward than the historical Microsoft staff reduction process, which is to randomly gaslight a high performer until he / she is traumatized enough to quit. Big savings on severance and unemployment claims.

  • Slaggggg

    These seem very light for the local staff, which feels hugely bloated.

    MS used to have an n-1 approach to hiring … that is if a job takes 10 people, you get 9, and you do it anyway. Lately it seems they are at n+5. I would have expected 20% cuts locally to force managers to dump unproductive people who have accumulated for so long.

    • http://www.extendedresults.com/ Patrick Husting

      But you miss the point. That 1 MSFT person doesn’t do anything but meetings. Each MSFT person has 2 or 3 vendors working for them.

  • justice must be served

    Here’s hoping all 5,500 non-Nokia cuts are in the HR department.

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  • blinkythecook

    Today’s announcement of Microsoft layoffs is a tragedy. I hope those affected keep their cool and move forward quickly! The first step is to create an awesome resume! Here are some great tips: http://expertbeacon.com/creating-resume-will-get-noticed

  • geekophobe

    Hey Hey Ho Ho H1-Bs gotta go! Back to your $hith0le countries. Jobs for Americans only!

  • Mark MacKay

    He needs an editor if he hopes to work with transparency. There’s so much biz speak in this statement. Own your words. You’re firing employees. Say it. Don’t synergize your way out of it.