Microsoft Corporation will be cutting 18,000 jobs over the next year, making it the company’s largest round of layoffs in its 39-year history.
The layoffs are as part of the tech company’s plan to simplify and integrate with its recently acquired Nokia Devices and Services, Microsoft said in a statement Thursday. All 18,000 jobs will be eliminated by June 30, 2015, according to the plan.
About 12,500 of the jobs being cut as part of Microsoft’s $7.2 billion acquisition of Nokia, although it isn’t clear which cuts will occur at Nokia and which occur at Microsoft. When Microsoft acquired Nokia on April 25, about 25,000 employees were transferred to Microsoft, making Microsoft's total workforce about 127,000.
The last time Microsoft laid off a significant number of employees was 2009, when about 5,800 people lost their jobs. In a memo to employees, chief executive Satya Nadella says he and Microsoft will be supportive and mindful of employees affected by the layoffs.
“My promise to you is that we will go through this process in the most thoughtful and transparent way possible,” he says.
Mr. Nadella, who replaced Steve Ballmer in February, says employees being laid off will be notified within the next six months. As part of the process to simplify its business, Nadella says Microsoft will have fewer layers of management to make more productive, effective employees.
Microsoft reported nearly $20.5 billion in revenue in its third quarter earnings report on April 25 – about the same amount the company earned in revenue last year. Last week, Nadella told employees in a memo that Microsoft will focus on its cloud computing and mobile devices, seeing that they now live in 'a mobile-first and cloud-first world.'
Microsoft expects to incur pre-tax charges of $1.1 billion to $1.6 billion over the next year – including $750 million to $800 million for severance and related benefit costs – and $350 million to $800 million of asset-related charges. Typically, a firm deducts all the costs of firing employees to one financial quarter so that shareholders only have one quarter of losing money, according to Slate.
Microsoft shares were up 2.4 percent to $45.15 as of Thursday morning. Microsoft will have release its next earnings report on July 22, where Nadella says he will share specifics on Microsoft's upcoming plans.