Today Microsoft announced a massive round of layoffs across its businesses via a communication shared by CEO Satya Nadella himself.
Nadella mentioned that the overall workforce of the company will be reduced by 10,000 jobs through the end of the third quarter of the fiscal year 2023. It's worth mentioning that Microsoft doesn't follow the usual April-March fiscal year which is the most common calendarization. Their fiscal year starts in June and ends in May, which means that the layoffs will be completed by March 31, 2023. This represents "less than 5 percent" of Microsoft's workforce, which has been growing consistently over the past few years, and some of the severance notifications are being delivered as early as today.
According to Principal Engineer for Xbox Growth & Loyalty Gary Waliczek the gaming division has been impacted, albeit the extent is unclear.
Nadella mentioned that customers accelerated their digital spend during the pandemic, but are now spending less, generating less demand. The layoffs were justified with the requirement to "align our cost structure with our revenue and where we see customer demand."
The operation will cost Microsoft $1.2 billion in severance costs recorded during Q2, the results for which will be announced on January 24. We'll have to wait until then to see the impact on the company's overall business.
Nadella added that Microsoft treats its employees with dignity and respect, so employees in the United States will receive "a variety of benefits, including above-market severance pay, continuing healthcare coverage for six months, continued vesting of stock awards for six months, career transition services, and 60 days’ notice prior to termination, regardless of whether such notice is legally required." Benefits for employees working overseas will match employment laws in their countries.
Despite the layoffs, the compant will continue to hire and invest in "key strategic areas" including AI.
