On January 18, US tech giant Microsoft announced that it would lay off 10,000 workers by the end of this year’s third quarter, accounting for just under 5% of its total employee count. According to a report by Jiemian News, the firm’s human resources department and US headquarters will be the hardest hit, with a layoff ratio higher than 5%. The firm’s China division will also be involved, but the layoff ratio is lower than 5%, and many R&D personnel will be included in the layoffs.
Microsoft CEO Satya Nadella said in a letter to employees, “These are the kinds of hard choices we have made throughout our 47-year history.” Nadella mentioned that American employees will receive above-market severance pay, health care and six months’ stock ownership. The adjustment, including severance pay and other restructuring expenses, will cost $1.2 billion. But he stressed that Microsoft will continue to recruit employees in key strategic areas.
He also reiterated changes to the business environment in recent months, saying, “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. We’re also seeing organizations in every industry and geographic area exercise caution as some parts of the world are in a recession and other parts are anticipating one.”
In the Chinese market, Microsoft China recently ended a lease on a building in Haidian District, Beijing. The company has already paid a deposit for enrollment expansion.
Just last September, Microsoft China announced on its official Weibo account that it would continue to expand recruitment in China in the coming year, and the total number of employees was expected to exceed 10,000. A person familiar with the matter said that Microsoft’s China expansion plan had been reported to the Asia-Pacific region at that time, but after the Asia-Pacific region passed, the US headquarters called back this plan. However, according to Jiemian News, Microsoft China’s enrollment expansion and business promotion plan will continue in 2023.
In fact, Microsoft’s layoffs have long been predicted. In July last year, Microsoft said it would lay off less than 1% of its employees worldwide, which is equivalent to a reduction of 2,000 employees, involving multiple departments including consulting, customer and partner solutions. Microsoft said at the time that the layoffs were mainly due to the readjustment of business units and roles after the end of the fiscal year ending June 30. However, it stressed that it will continue to recruit other positions and increase the overall staff number by the end of this fiscal year.
In October of last year, Microsoft released its first-quarter financial report, showing revenue of $50.122 billion, an increase of 11% compared with $45.317 billion in the same period of 2021. Its net profit was $17.556 billion, down 14% compared with $20.505 billion in the same period of 2021. This is considered to be Microsoft’s weakest financial report since 2017, and its decline in net profit hit a new high in two years.
Also in October, the Microsoft headquarters confirmed a report by Axios showing that the firm will lay off employees in several departments. Microsoft declined to disclose the specific number of jobs to be cut at that time, but according to Axios, citing sources, the number would be less than 1,000, involving Xbox, strategic tasks and technical organizations.
In November, a former Microsoft employee told Jiemian News that Microsoft China had started a round of layoffs in Shenzhen.
Last week, news emerged that Microsoft was discussing plans to further invest up to $10 billion in OpenAI, the research laboratory behind ChatGPT and image generator Dall-E 2. Some analysts pointed out that the layoffs are the direct result of ChatGPT, because the investment of $10 billion must come from somewhere. The firm’s latest official statement also shows that it seeks to adjust its hardware and leasing business.