Microsoft CEO Satya Nadella hinted at the possibility of job cuts in his memo to employees Thursday, and one longtime analyst, Nomura’s Rick Sherlund, is now predicting that the company will reduce its headcount by something in the range of 5 percent to 10 percent.
As outlined by Sherlund in a note to clients this morning, those cutbacks would include reductions related to Microsoft’s acquisition of Nokia’s devices and services business. The company has said it will cut $600 million in annual costs for 18 months after the deal closes to address areas where the two companies overlap.
Microsoft isn’t commenting on the possibility of layoffs. Prior to the Nokia deal, Microsoft had reached about 100,000 employees worldwide. The company says it now has more than 127,000 employees, as of early June.
On the topic of Nadella’s broader memo, Sherlund writes that he’s waiting for something more concrete.
“We are confused by Mr. Nadella comments about focus. He mentions focus but then goes on to articulate how they need to be in devices like Surface first party hardware and Xbox, so we are not sure what focus means exactly if he keeps all the existing businesses including search,” he writes. “The worst thing we think he can do is be incremental, just rearrange the chairs.”
In his memo, Nadella said “nothing is off the table” and promised to streamline the company’s engineering processes and decision-making, saying he’ll give more details with the company’s earnings report later this month. At the same time, he said the company remains committed to the Xbox business even though it’s not “core” to Microsoft.
Previously: Meet the new Microsoft: Key takeaways from Satya’s big memo — and yes, job cuts are likely
