Layoffs Loom at Microsoft

Layoffs Loom at Microsoft

In with the new, out with the bad

Microsoft will announce the biggest layoffs in its history as soon as Thursday, according to a reliable report in Bloomberg. The move comes in the wake of a massive—some say unnecessary—$7.2 billion purchase of Nokia's devices and services businesses and a promise from CEO Satya Nadella that he will flatten Microsoft's corporate structure and, it is expected, removes redundant layers of management.

Bloomberg described the coming layoffs as perhaps the worst in Microsoft's history, with the 5,800 employees that were shed in 2009 being the current low-water mark. But as many have observed, that Nokia purchase also came with 25,000 additional employees and their lucrative job contracts. That's a volume of new employees that the top-heavy Microsoft can ill afford to absorb.

The timing of the announcement is likely to fall between this week's Worldwide Partner Conference—at which 16,000 of the software giant's closest partners have gathered to hear the latest strategic moves—and next week's quarterly and annual earnings announcement. That leaves a window of just a few days, and my own sources say the layoffs will be announced Thursday or Friday.

Mr. Nadella hinted the layoffs last week in an open letter to employees.

"We will streamline the engineering process and reduce the amount of time and energy it takes to get things done," he wrote. "You can expect to have fewer processes but more focused and measurable outcomes. You will see fewer people get involved in decisions and more emphasis on accountability."

So Nadella isn't just remaking Microsoft's business focus—the change from "devices and services" to "mobile first, cloud first" is about as subtle as it gets, but Microsoft has really embraced a heterogeneous world of competing technology platforms—he's also remaking the firm's internal structure and, thus, headcount. This makes plenty of sense: In its current makeup, Microsoft simply has too many employees and levels of management standing in the way of decision making.

It's not currently clear whether a majority of cuts will come from particular businesses, but given the distributed nature of the company, I'd be surprised if we didn't see these long-overdue cuts come from all over the company. A Finnish newspaper, said Wednesday that 1,000 of those cuts would come from a former Nokia facility in that country, and that Microsoft would close a research and development center there.

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