Microsoft is poised to announce thousands of job cuts as soon as this week, and the cuts could end up being the largest in the company’s history — potentially exceeding the 5,800 employees laid off by the company at the height of the 2009 economic crisis, according to a report by Bloomberg News overnight, citing unidentified people familiar with the company’s plans.
The report follows a memo last week in which Microsoft CEO Satya Nadella foreshadowed major organizational changes and hinted at the possibility of job cuts. Microsoft is expected to make some measure of cuts to eliminate overlapping operations following its $7.2 billion acquisition of Nokia’s smartphone business, but the cuts are expected to go beyond that in an effort to bring new efficiencies to Microsoft’s engineering operations.
Nomura’s Rick Sherlund, a longtime Wall Street analyst, wrote in a note to clients this morning that he expects “bold moves and organizational change intended to restore a culture of innovation.”
Nomura raised its price target for Microsoft to $50/share.
Sherlund wrote, “Our expectation is for a substantial ($1 billion plus) charge to mitigate the Nokia acquisition risk and focus the strategic direction of the company away from the previous devices/services strategy and drive the company into a new generation of productivity apps and services and pursue the subscription and cloud businesses of Office 365 and a more aggressive push into PaaS (platform-as-a-service).”
Nadella, who has been CEO for five months, is scheduled to speak Wednesday morning at Microsoft’s Worldwide Partner Conference in Washington, D.C., and also will be part of the company’s earnings conference call a week from now, on July 22.
The Microsoft CEO wrote in his memo to employees last week, “Nothing is off the table in how we think about shifting our culture to deliver on this core strategy. Organizations will change. Mergers and acquisitions will occur. Job responsibilities will evolve. New partnerships will be formed. Tired traditions will be questioned. Our priorities will be adjusted. New skills will be built. New ideas will be heard. New hires will be made. Processes will be simplified. And if you want to thrive at Microsoft and make a world impact, you and your team must add numerous more changes to this list that you will be enthusiastic about driving.”
Previously: Meet the new Microsoft: Key takeaways from Satya’s big memo — and yes, job cuts are likely
