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Microsoft begins laying off 10,000 workers as tech job cuts spread
Microsoft on Wednesday initiated new layoffs affecting 10,000 employees, in the latest sweeping job cuts to hit Silicon Valley as firms slash costs to grapple with an economic slowdown.
The layoff, far larger than prior cuts by Microsoft last year, pile on to tens of thousands of job cuts across the technology sector that has deflated following soaring growth during the pandemic.
Microsoft's move corresponds with the date its rival Amazon has said more employees will be notified in its own mass layoffs of 18,000 people, following similar moves at Meta, Twitter and other tech firms.
In a reversal of typical trends during a downturn, highly paid white-collar workers are seeing steep job losses, while blue-collar workers remain in hot demand, a trend some have dubbed a 'richcession'.
In a memo to employees, CEO Satya Nadella said the layoffs, affecting nearly 5 percent of the workforce, would begin on Wednesday and conclude by the end of March
Microsoft joins a raft of rivals, such as Amazon and Facebook owner Meta, in trimming their workforces on fears of a slowdown in demand
At Amazon, layoffs announced in November and earlier this month will total 18,000, and the company has said the latest round of notifications would begin going out on Wednesday.
The layoff news is particularly dramatic for Microsoft, a software maker heavily invested in generative artificial intelligence that represents an industry bright spot.
The company said in a regulatory filing it would take a $1.2 billion restructuring charge associated with the layoffs, which said come 'in response to macroeconomic conditions and changing customer priorities.'
In a memo to employees, CEO Satya Nadella said the layoffs, affecting nearly 5 percent of the workforce, would begin on Wednesday and conclude by the end of March.
'We're living through times of significant change,' wrote Nadella, adding that 'parts of the world are in a recession and other parts are anticipating one.'
Nadella said customers wanted to 'optimize their digital spend to do more with less' and 'exercise caution as some parts of the world are in a recession and other parts are anticipating one.'
'While we are eliminating roles in some areas, we will continue to hire in key strategic areas,' he wrote.
Microsoft's move corresponds with the date its rival Amazon has said more employees will be notified in its own mass layoffs of 18,000 people. Pictured: An Amazon warehouse
Another company serving enterprises, Palantir Technologies, said this week that reducing cloud spending was a top-ten priority of its customers.
In addition to severance costs, Microsoft would take a billion-dollar charge from changes to its lineup of hardware products and from consolidating leases 'as we create higher density across our workspaces,' Nadella said.
The charge in the second quarter of fiscal 2023 represents a negative impact of 12 cents per share profit, Microsoft said.
Wedbush Securities analyst Dan Ives said, 'This is a rip the band-aid off moment to preserve margins and cut costs in a softer macro, a strategy the Street will continue to applaud.'
Nadella said the company would continue to invest capital and talent in strategic areas, like AI and a service offering OpenAI's ChatGPT, a futuristic chatbot that has captivated Silicon Valley.
'The next major wave of computing is being born with advances in AI, as we're turning the world's most advanced models into a new computing platform,' he said.
Microsoft said in July last year that a small number of roles had been eliminated, while news site Axios in October reported that the company had laid off under 1,000 employees across several divisions.
The company is also grappling with a slump in the personal computer market after a pandemic boom fizzled out, leaving little demand for its Windows and accompanying software.
It comes as Microsoft is fighting a regulatory battle to secure approval of its potential $68 billion takeover of Activision Blizzard, the marker of cult-video game Call of Duty.
Last month it also acquired a $1.8 billion stake in the owner of the London Stock Exchange as part of a long-term cloud computing partnership.
Microsoft's stock rating was downgraded by analysts at Guggenheim ahead of its earnings report next week.
The firm wrote: 'While most investors see Microsoft as a large stable business that can weather any storm, it does have vulnerabilities, some of which could be exacerbated by this macro[economic] slowdown.'
Tech job cuts - including mass layoffs at Meta and Twitter - are accelerating
In recent months, a slew of tech companies have announced cost-cutting measures, with Amazon, Apple and Google-parent Alphabet all announcing hiring slowdowns or freezes.
For the tech sector, the pandemic boom has turned to a post-pandemic bust, as rising interest rates batter share prices and inflation cuts into profits.
The sector shed 9,587 jobs in October, the highest monthly total since November 2020, according to data from consulting firm Challenger, Gray & Christmas cited by Bloomberg.
Total job cuts announced by US-based employers jumped 13 percent to 33,843 in October, the highest since February 2021, a report said.
Meta
The Facebook-parent said in November it would cut 13 percent of its workforce, or more than 11,000 employees, in one of the biggest tech layoffs this year as it grapples with a weak advertising market and mounting costs.
Meta said it would cut 13 percent of its workforce, or more than 11,000 employees, in one of the biggest tech layoffs this year
Like its peers, Meta aggressively hired during the pandemic to meet a surge in social media usage by stuck-at-home consumers.
But but the pandemic boom-times have petered out as advertisers and consumers pull the plug on spending in the face of soaring costs and rapidly rising interest rates.
After plunging billions into CEO Mark Zuckerberg's Metaverse vision with little to show for it, Meta has been faced with rising costs and shrinking profits.
Meta, once worth more than $1 trillion, is now valued at $256 billion after losing more than 70 percent of its value this year alone.
'Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I'd expected,' Zuckerberg said in a message to employees, according to Reuters.
'I got this wrong, and I take responsibility for that.'
Zuckerberg delivered the grim news about job cuts on a call with hundreds of Meta executives
On a short call, a red-eyed Zuckerberg addressed employees but took no questions.
He stuck to a script that closely followed the wording in the morning's blogpost and called the increased investments in e-commerce a 'big mistake in planning.'
Twitter laid off half its workforce across teams ranging from communications and content curation to product and engineering following Elon Musk's $44 billion takeover.
The cutbacks affected roughly 3,700 employees, who learned their fate by email last week.
However, Bloomberg reported Twitter was reaching out to dozens of employees who lost their jobs, asking them to return.
Twitter laid off half its workforce across teams ranging from communications and content curation to product and engineering
Musk previously said there was no other choice but to impose mass layoffs as the company loses hundreds of millions of dollars every year and needs a financial overhaul
Salesforce
In January, cloud-based software company Salesforce announced it will layoff 10 percent of its employees or about 8,000 workers.
CEO Marc Benioff cited a rough period for the tech sector as well as over-hiring during COVID-19 leading to the decision.
Several weeks ago, it quietly laid off hundreds of employees.
'Our sales performance process drives accountability. Unfortunately, that can lead to some leaving the business, and we support them through their transition,' a Salesforce spokesperson told CNBC in a statement several weeks ago.
Salesforce had 73,541 employees at the beginning of last year - it is the largest employer in the San Francisco area.
The company said in an August filing that headcount rose 36 percent in the past year 'to meet the higher demand for services from our customers.'
Amazon
Amazon said it would layoff 18,000 corporate and technology jobs what will be the largest job cuts in the company's history.
The move comes as the company reportedly lost $1trillion over the year after its stock plummeted from a high during the pandemic.
If the company goes through with its proposal to cut 10,000 jobs, it would lose about 3 percent of Amazon's corporate employees
The move comes after the company put a hiring freeze in place, affecting major teams including Prime Video, Alexa and Amazon Fresh.
'We're facing an unusual macroeconomic environment, and want to balance our hiring and investments with being thoughtful about this economy,' Beth Galetti, senior vice president of people experience and technology at Amazon, wrote in a memo, which was seen by the Wall Street Journal.
Intel
Intel Corp's CEO Pat Gelsinger told Reuters 'people actions' would be part of a cost-reduction plan.
The chipmaker said recently it would reduce costs by $3 billion in 2023, then ramping that up to $10 billion by 2025.
The adjustments would start in the fourth quarter, Gelsinger said, but did not specify how many employees would be affected.
Some Intel divisions, including the sales and marketing group, could be cut by up to 20 percent, Bloomberg News reported last month, citing people with knowledge of the situation.
Chipmaker Intel is reportedly planning major layoffs, likely numbering in the thousands, in the face of a slowdown in the personal computer market
The company had 113,700 employees as of July, when it slashed its annual sales forecast by $11 billion after missing estimates for second-quarter results.
Intel, based in Santa Clara, California declined to comment on the job cuts when reached by DailyMail.com in October.
Intel has been battered by shifting market trends, including the decline of traditional personal computers as smartphones and tablets rise in popularity.
Last quarter, global PC shipments, including desktops and laptops, declined another 15 percent from a year ago, according to IDC.
Microsoft
Microsoft in January initiated layoffs of 10,000 employees, citing slowing customer demand and a negative economic environment.
'We're also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one,' CEO Satya Nadella said in a company memo.
The layoffs affected nearly 5 percent of Microsoft's global workforce.
Microsoft previously laid off under 1,000 employees across several divisions last year, according to Axios.
In a statement, Microsoft executives said: 'Like all companies, we evaluate our business priorities on a regular basis, and make structural adjustments accordingly.
Microsoft laid off under 1,000 employees across several divisions last month, according to Axios
'We will continue to invest in our business and hire in key growth areas in the year ahead.'
Microsoft executives previously announced in July that it was laying off less than 1 percent of its workforce and significantly slow hiring, as its revenue fell short of investor expectations.
The company recorded only $51.9 billion in revenue during the second quarter of the year, but was expected to rake in $52.4 billion.
It had previously recorded blockbuster growth during the COVID pandemic, when consumers and businesses turned to its products as they shifted to a work-from-home model.
Lyft
Ride-hailing firm Lyft said it would lay off 13 percent of its workforce, or about 683 employees, after it already cut 60 jobs earlier this year and froze hiring in September.
Lyft said in a regulatory filing it would likely incur $27 to $32 million in restructuring charges related to the layoffs.
'We are not immune to the realities of inflation and a slowing economy,' Lyft's founders wrote in the memo to staffers.
Ride-hailing firm Lyft said it would lay off 13 percent of its workforce, or about 683 employees, after it already cut 60 jobs earlier this year
The company's share price has fallen 76 percent since the beginning of the year and currently stands at around $10, compared to nearly $45 in January.
Announcing the job cuts in a memo seen by the Wall Street Journal, Lyft founders John Zimmer and Logan Green told staff: 'There are several challenges playing out across the economy.
'We're facing a probable recession sometime in the next year and rideshare insurance costs are going up.
'We worked hard to bring down costs this summer: we slowed, then froze hiring; cut spending; and paused less-critical initiatives.
'Still, Lyft has to become leaner, which requires us to part with incredible team members.'
Lyft has about 4,000 employees, not including its drivers.
Apple CEO Tim Cook told CBS Mornings on Monday he plans to freeze hiring
Apple
Though Apple has not yet announced any major layoffs, CEO Tim Cook told CBS Mornings that it is slowing some hiring as well.
'What we're doing as a consequence of being in this period, is we're being very deliberate in our hiring,' he said. 'That means we're continuing to hire, but not everywhere in the company are we hiring.'
At the same time, though, Cook said 'we don't believe you can save your way to prosperity."
'We think you invest your way to it,' he said.