Microsoft Terminates 18000 Employees. MSFT Stock Skyrockets
Satya Nadella, CEO of Microsoft has just sent a memo to all employees, announcing that 18,000 positions inside the company would be terminated. This is the largest layoff announced by Microsoft ever; previous highest being 5800, during the recession in 2009.
In the memo (appended at the end of the post), Satya said, “The first step to building the right organization for our ambitions is to realign our workforce. With this in mind, we will begin to reduce the size of our overall workforce by up to 18,000 jobs in the next year.”
It is being estimated that the company will spend close to $1 billion in settling severance and employee benefits allowances.
Nokia will bear the load of maximum job cuts; as 12,500, which is almost half of Nokia’s total employee strength would be terminated from their jobs within the next 12 months. All of these employees were part of Nokia’s Devices and Services department, which will be now merged with Microsoft’s internal teams.
In the month of May this year, 5000 employees from Nokia’s Chennai factory had opted for severance packages and left the company voluntarily. There were still about 1600 more employees in that factory who were working. As of now, it is not clear whether these Indian employees are part of this giant layoff or not.
Although this huge number is really significant, technological observers were anticipating this move. When Microsoft had acquired Nokia last year by paying 5.44 billion Euro, they had pledged to annual cost savings of $600 million, within 18 months of completing this acquisition, which happened on April, 2014.
Right now Microsoft is doing everything possible to increase their revenues which are still dependent on Windows OS. For example, they are venturing into gadgets, low priced tablets, cloud computing and even luring small businesses with interesting offers. Just couple of days back they announced that they will be launching $199 laptops and $99 tablets to challenge Chromecast and iPad market share.
The current restructuring and alignment process which has been spear-headed by Satya will certainly help them achieve their business objectives and it has mightily pleased the share holders. And the stock market has just proven that; as per reports coming in, Microsoft shares are trading at a high of 14 years.
But its an end of road for those Nokia employees, who have seen some better days in the past.
Full Text of the Memo sent by Satya Nadella to its Employees!
From: Satya Nadella
To: All Employees
Date: July 17, 2014 at 5:00 a.m. PT
Subject: Starting to Evolve Our Organization and Culture
Last week in my email to you I synthesized our strategic direction as a productivity and platform company. Having a clear focus is the start of the journey, not the end. The more difficult steps are creating the organization and culture to bring our ambitions to life. Today I’ll share more on how we’re moving forward. On July 22, during our public earnings call, I’ll share further specifics on where we are focusing our innovation investments.
The first step to building the right organization for our ambitions is to realign our workforce. With this in mind, we will begin to reduce the size of our overall workforce by up to 18,000 jobs in the next year. Of that total, our work toward synergies and strategic alignment on Nokia Devices and Services is expected to account for about 12,500 jobs, comprising both professional and factory workers. We are moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months. It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas. My promise to you is that we will go through this process in the most thoughtful and transparent way possible. We will offer severance to all employees impacted by these changes, as well as job transition help in many locations, and everyone can expect to be treated with the respect they deserve for their contributions to this company.
Later today your Senior Leadership Team member will share more on what to expect in your organization. Our workforce reductions are mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment.
First, we will simplify the way we work to drive greater accountability, become more agile and move faster. As part of modernizing our engineering processes the expectations we have from each of our disciplines will change. In addition, we plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making. This includes flattening organizations and increasing the span of control of people managers. In addition, our business processes and support models will be more lean and efficient with greater trust between teams. The overall result of these changes will be more productive, impactful teams across Microsoft. These changes will affect both the Microsoft workforce and our vendor staff. Each organization is starting at different points and moving at different paces.
Second, we are working to integrate the Nokia Devices and Services teams into Microsoft. We will realize the synergies to which we committed when we announced the acquisition last September. The first-party phone portfolio will align to Microsoft’s strategic direction. To win in the higher price tiers, we will focus on breakthrough innovation that expresses and enlivens Microsoft’s digital work and digital life experiences. In addition, we plan to shift select Nokia X product designs to become Lumia products running Windows. This builds on our success in the affordable smartphone space and aligns with our focus on Windows Universal Apps.
Making these decisions to change are difficult, but necessary. I want to invite you to my monthly Q&A event tomorrow. I hope you can join, and I hope you will ask any question that’s on your mind. Thank you for your support as we start to take steps forward in evolving our organization and culture.