Microsoft informs employees of the latest layoff decision

Microsoft confirmed its decision to cut thousands of jobs. In a recent blog post showing the memo of Microsoft CEO Satya Nadella to the company workforce, it was specified that the company would lay off 10,000 workers through the end of its FY23 Q3, which is on March 31. 

The number of cuts represents 5% of Microsoft’s 221,000 worker population. Nadella didn’t detail the departments that will be affected in the memo, but sources of The Verge said it would hit those workers related to HoloLens, Microsoft Edge, 343 Industries, Bethesda, and the marketing department. Eight hundred employees have already been notified, reaching even the tenured ones. For instance, Ben Rudolph, who used to work as a global creative director, ended his 15-year relationship with Microsoft today. Nonetheless, the company chairman ensured that those affected would be given benefits.

“We are committed to ensuring all those whose roles are eliminated have our full support during these transitions,” explained Nadella. “U.S.-benefit-eligible employees 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 outside the U.S. will align with the employment laws in each country.”

On the other hand, despite the terrible news for thousands of Microsoft employees, Nadella noted that they “will continue to hire in key strategic areas” and “invest in strategic areas for our future.” In relation to this, the CEO shared that the company decided to take a $1.2 billion charge (-$0.12 per share) in its Q2 earnings due next week. Nadella said it would be for severance costs, building leases, and “changes to our hardware portfolio.”

“…We will continue to invest in strategic areas for our future, meaning we are allocating both our capital and talent to areas of secular growth and long-term competitiveness for the company, while divesting in other areas,” Nadella explained, justifying the charge. “These are the kinds of hard choices we have made throughout our 47-year history to remain a consequential company in this industry that is unforgiving to anyone who doesn’t adapt to platform shifts.”

Microsoft’s layoff announcement is just one of the latest in the tech industry, which is experiencing great challenges due to the poor economic climate globally. However, aside from this general fact, Microsoft has its specific business hurdles that led to this point. One huge factor is the company’s current HoloLens IVAS situation, which would be covered in its hardware portfolio “changes,” according to sources of Bloomberg. This year, the U.S. Congress declined to fund the request of the Army to buy up to 6,900 combat goggles adapted from Microsoft’s HoloLens headsets. Instead of getting $400 million, the Army received a total of $40 million, which spelled business problems for Microsoft.

Aside from that, the company’s obstacles extend to its slowing P.C. sales as more workers and businesses return to normal operations, which means fewer customers who need to purchase computers for their work-from-home setup. Last year, Microsoft said it was expecting a 30 percent drop in its devices revenue (Microsoft’s bundled revenues of HoloLens, Surface, and P.C. accessories) and Windows OEM revenue this Q2, 2023. With this recent layoff announced and the $1.2 billion charge, those forecasts might be true… or even worse. So, the question now is how much these business issues would push Microsoft to change its products and offerings. Well, its ChatGPT integration plan on its products and the rumored not-so-Duo-looking third-generation Duo are two good answers for that.