Microsoft CEO Satya Nadella announced plans to cut 18,000 jobs, the largest in history.
In a memo to employees Nadella, said the majority of the cuts — 12,500 — will come from newly acquired Nokia. That’s half of the employees that joined Microsoft from Nokia.
As for the timing of the cuts, he says, “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.”
Microsoft’s highest ever job cuts prior to this were 5,800 in early 2009 during the low point of the recession.
Microsoft has 127,104 employees worldwide, so these cuts impact 15% of its workforce. As a result of these layoffs, Microsoft will have a charges of $US1.1-$1.6 billion related to severance and benefits packages.
“Nothing is off the table in how we think about shifting our culture … Organisations will change,” he wrote at the time. “Tired traditions will be questioned. Our priorities will be adjusted…”
In today’s memo, he says these cuts are “the first step to building the right organisation for our ambitions is to realign our workforce.”
Microsoft’s stock was at the highest its been in almost 14 years yesterday. It is up 1.45% in pre-market trading on this news.
There’s more than just layoff news in Nadella’s announcement.
Buried deep in the memo he says Microsoft will stop making Android phones through Nokia: “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.”
Just after Microsoft bought Nokia, Nokia started making Android-based phones. This was a surprise since Microsoft makes its own mobile operating system — Windows Phone.
Nadella had no desire to continue with Android. He wants Microsoft’s operating system to be the company’s only mobile operating system.
Here’s the memo:
From: Satya Nadella
To: All Employees
Date: July 17, 2014 at 5:00 a.m. PT
Subject: Starting to Evolve Our Organisation 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 organisation 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 organisation 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 organisation. 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 organisations 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 organisation 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 realise 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 organisation and culture.