Layoffs in the tech sector have spread across small, medium and large enterprises and the trend continues in 2023. Microsoft is the latest corporation to announce massive job cuts, a move that will cost the company $1.2 billion in severance costs.
Microsoft says the layoffs will also affect changes to its hardware portfolio and the cost of lease consolidation.
While addressing the World Economic Forum (WEF) in Davos, Switzerland Microsoft CEO Satya Nadella said that the company was not immune to a weaker global economy.
Speaking to WEF founder Klaus Schwab in a live-streamed discussion Satya said “No one can defy gravity and gravity here is inflation-adjusted economic growth,”
Nadella followed that up with a memo to Microsoft staff. He wrote:
“We’re living through times of significant change, and as I meet with customers and partners, a few things are clear. First, as we saw customers accelerate their digital spending during the pandemic, we’re now seeing them optimize their digital spending to do more with less.”
The company employs approximately 221,000 full-time employees globally as of June 30, 2022, according to a US Securities and Exchange Commission filing. Out of these, 122,000 are based in the United States.
The CEO says that the job cut represents less than 5% of the company’s total workforce.“ These decisions are difficult but necessary,” Nadella wrote.
Nadella pointed out that the company will invest in “strategic areas for our future,” citing AI as “the next major wave” of computing. This comes at a time when the company is said to be making a significant investment in Ai startup OpenAI, the creator of the popular AI chatbot, ChatGPT.