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Tech job cuts spread, Microsoft lays off 10,000

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Microsoft is cutting 10,000 employees, nearly 5% of its workforce, joining other tech companies that reduced their pandemic-era expansions.

The company said in a regulatory filing on Wednesday that the layoffs were a response to “macroeconomic conditions and changing customer priorities”.

The Redmond, Wash.-based software giant said it would also make changes to its hardware portfolio and consolidate its leased offices.

Microsoft is cutting far fewer jobs than it added during the COVID-19 pandemic as it responded to a boom in demand for its work software and cloud computing services with so many people working and studying from home.

“A lot of it is over-exuberance in hiring,” said Joshua White, professor of finance at Vanderbilt University.

Microsoft’s workforce increased by about 36% in the two fiscal years after the pandemic emerged, from 163,000 workers at the end of June 2020 to 221,000 in June 2022.

The layoffs represent “less than 5% of our total employee base, with some notices happening today,” CEO Satya Nadella said in an email to employees.

“While we are eliminating positions in some areas, we will continue to hire in key strategic areas,” said Nadella. He stressed the importance of building a “new computer platform” using advances in artificial intelligence.

He said customers who were accelerating their digital technology spend during the pandemic are now trying to “optimize their digital spend to do more with less.”

“We are also seeing organizations across industries and geographies move with caution as some parts of the world are in a recession and others are predicting one,” Nadella wrote.

Other tech companies are also cutting jobs. amid concerns about an economic slowdown.

Amazon and commercial software maker Salesforce earlier this month announced major job cuts as they cut payrolls that expanded rapidly during the pandemic lockdown.

Amazon said it will cut about 18,000 positions. It’s the biggest set of layoffs in the Seattle company’s history, though it’s just a fraction of its global workforce of 1.5 million.

Meta, Facebook’s parent company, is laying off 11,000 people, about 13% of its workforce. And Elon Musk, the new CEO of Twitter, has cut the company’s workforce.

Nadella made no direct mention of the layoffs on Wednesday when he attended the annual meeting of the World Economic Forum. taking place this week in Davos, Switzerland.

When asked by forum founder Klaus Schwab what tech layoffs have meant for the industry’s business model, Nadella said that companies that grew during the COVID-19 pandemic are now seeing the “normalization” of that demand.

“Frankly, we in the tech industry will also have to be efficient, right?” Nadela said. “It’s not about everyone doing more with less. We will have to do more with less. So we will have to show our own productivity gains with our own kind of technology.”

Microsoft declined to respond to questions about where layoffs and office closures were concentrated. The company sent a notice to Washington state labor officials on Wednesday that it was laying off 878 employees at its offices in Redmond and the neighboring towns of Bellevue and Issaquah.

As of June, it had 122,000 workers in the US and 99,000 elsewhere.

White, the Vanderbilt professor, said all industries are looking to cut costs ahead of a possible recession, but technology companies can be particularly sensitive to rapidly rising interest rates, a tool that has been used aggressively in recent months by the Federal Reserve in its fight against inflation.

“It hits tech companies a little harder than industrial or consumer staples because a big part of Microsoft’s value is in projects with cash flows that won’t pay for several years,” he said.

Among the projects that have been drawing attention recently is Microsoft’s investment in its San Francisco startup partner OpenAI, maker of the ChatGPT writing tool. and other AI systems that can generate readable text, images and computer code.

Microsoft, which owns the Xbox games business, also faces regulatory uncertainties in the United States and Europe, delaying its planned $68.7 billion acquisition of video game company Activision Blizzard, which had about 9,800 employees a year ago.


AP business writer Kelvin Chan contributed to this story from London.