Microsoft 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.
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.