The restructuring, amounting to about 14% of its workforce, includes 12,500 Nokia factory and professional positions half the number of employees added in the acquisition. At Microsoft, cuts will be in sales, marketing and engineering. The reductions are expected to be completed by June 30, 2015, and will result in a pretax charge of $1.1 billion to $1.6 billion, Microsoft said in a statement on Thursday.
The layoffs, the first since Nadella took over the helms of the company five months ago, however, will have minimal impact on India, which is an important geography for the US-based giant. When asked about the restructuring impact , a Microsoft India spokesperson said: We have about 6,500 employees in India, which also includes employees from Nokia. The impact will be minimal. It will be very very small.
Nadella, who took over from Steve Ballmer in February, is retooling the companys structure as it seeks to compete with nimbler rivals offering mobile and Internet-based software and services.
Hes also working to wring a promised $600 million in annual savings from Microsofts Nokia deal, which added 25,000 workers in April, bringing the total to 127,100. Microsoft needs to be leaner in the coming years to strike the right balance of growth and profitability around its cloud and mobile
endeavours, said Daniel Ives, an analyst at FBR Capital
The company will start with 13,000 cuts on Thursday and the majority of eliminated workers will be notified in the next six months, Nadella said in an e-mail to employees. The company will also have fewer layers of management and will make changes to its outside vendor staff, he said. The first step to building the right organisation for our ambitions is to realign our workforce, he wrote.
Last week, in his first mission statement, Nadella said the Redmond, Washington-based software maker needs to become more focussed and efficient and requires changes to its engineering teams. He pledged updates on the new plans later this month, and said he would provide more details when the company reports earnings on July 22.
Microsoft investors are likely to view the cuts as a positive, illustrating that Nadella is
trying to get costs and headcount under control and that he understands the challenges facing Microsoft, Ives said.
We view this as another step in the right direction from the Streets perspective, he said. Nadella is not wearing rose-coloured glasses.
Microsoft has only undertaken a companywide restructuring affecting thousands of workers once before, in 2009, at the start of the recession. During that year, the company cut 5,800 jobs, or about 5% of its workforce at the time. As the technology industry shifts towards mobile computing and cloud-based services, other companies have also sought to keep up by streamlining and firing workers.
Hewlett-Packard in May disclosed 16,000 more job cuts after reporting an 11th straight quarter of declining sales. IBM also started dismissing workers earlier this year.