It’s official. Microsoft CEO Satya Nadella informed staff that it will be making 10,000 job cuts between now and April, although the company will “continue to hire in key strategic areas.”
Around 800 employees have been given termination notices already, with the remaining redundancies to occur by the end of the financial quarter.
Those already given their marching orders include teams working on the Microsoft Edge browser, and HoloLens, as well as gaming companies 343 Industries and Bethesda.
Nadella explained the company needed to “align our cost structure with our revenue and where we see customer demand” and as such, “we will continue to invest in strategic areas for our future, meaning we are allocating both our capital and talent to areas of secular growth and long-term competitiveness for the company, while divesting in other areas.”
Microsoft will also take a $1.2 billion charge in its Q2 earnings, which will be released on January 25.
Given the cutbacks and charge, the forecast is gloomy for those financials. Stock was down 1.89 per cent at the close, following the news.
The $1.2 billion charge is “related to severance costs, changes to our hardware portfolio, and the cost of lease consolidation as we create higher density across our workspaces”, suggesting that the company may be scaling back its various hardware projects.
“It’s important to note that while we are eliminating roles in some areas, we will continue to hire in key strategic areas,” Nadella wrote.
“We know this is a challenging time for each person impacted. The senior leadership team and I are committed that as we go through this process, we will do so in the most thoughtful and transparent way possible.”
Microsoft has around 220,000 employees; as Nadella notes “This represents less than 5 percent of our total employee base.”
It’s hard not to mention the vast contrast between these firings and news that Microsoft is in talks to tip A$14.5 billion into OpenAI, whose ChatGPT promises to upend numerous industries.
Yesterday, the company announced in a blog it will be bringing ChatGPT into its Azure Open AI service, as well as making that service widely available.
ChatGPT is coming soon to the Azure OpenAI Service, which is now generally available, as we help customers apply the world’s most advanced AI models to their own business imperatives. https://t.co/kQwydRWWnZ
— Satya Nadella (@satyanadella) January 17, 2023
“Azure OpenAI Service provides businesses and developers with high-performance AI models at production scale with industry-leading uptime,” Microsoft explains.
“This is the same production service that Microsoft uses to power its own products, including GitHub Copilot, an AI pair programmer that helps developers write better code, Power BI, which leverages GPT-3-powered natural language to automatically generate formulae and expressions, and the recently-announced Microsoft Designer, which helps creators build stunning content with natural language prompts.”
It seems inevitable that Microsoft will invest more money into the company, considering how heavily they are integrating its functionality into its suite of products.
Microsoft invested A$1.45 billion into OpenAI in 2019, striking an exclusive license to use the technology.
It is already using the underlying GPT-3 technology elsewhere: in its auto-suggest and grammar check functions in Word and PowerPoint; to tinker with audio acoustics and reduce room echo in Teams; and to autocomplete code.
As Nadella told the Wall Street Journal, regarding the fast march of artificial intelligence: “The best way to prepare for it is not to bet against this technology, and this technology helping you in your job and your business process.”
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Read the entire memo sent to staff, below:
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 spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less. We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one. At the same time, the next major wave of computing is being born with advances in AI, as we’re turning the world’s most advanced models into a new computing platform.
This is the context in which we as a company must strive to deliver results on an ongoing basis, while investing in our long-term opportunity. I’m confident that Microsoft will emerge from this stronger and more competitive, but it requires us to take actions grounded in three priorities.
First, we will align our cost structure with our revenue and where we see customer demand. Today, we are making changes that will result in the reduction of our overall workforce by 10,000 jobs through the end of FY23 Q3. This represents less than 5 percent of our total employee base, with some notifications happening today. It’s important to note that while we are eliminating roles in some areas, we will continue to hire in key strategic areas. We know this is a challenging time for each person impacted. The senior leadership team and I are committed that as we go through this process, we will do so in the most thoughtful and transparent way possible.
Second, we will continue to invest in strategic areas for our future, meaning we are allocating both our capital and talent to areas of secular growth and long-term competitiveness for the company, while divesting in other areas. These are the kinds of hard choices we have made throughout our 47-year history to remain a consequential company in this industry that is unforgiving to anyone who doesn’t adapt to platform shifts. As such, we are taking a $1.2 billion charge in Q2 related to severance costs, changes to our hardware portfolio, and the cost of lease consolidation as we create higher density across our workspaces.
And third, we will treat our people with dignity and respect, and act transparently. These decisions are difficult, but necessary. They are especially difficult because they impact people and people’s lives – our colleagues and friends. We are committed to ensuring all those whose roles are eliminated have our full support during these transitions. U.S.-benefit-eligible employees will receive a variety of benefits, including above-market severance pay, continuing healthcare coverage for six months, continued vesting of stock awards for six months, career transition services, and 60 days’ notice prior to termination, regardless of whether such notice is legally required. Benefits for employees outside the U.S. will align with the employment laws in each country.
When I think about this moment in time, the start of 2023, it’s showtime – for our industry and for Microsoft. As a company, our success must be aligned to the world’s success. That means every one of us and every team across the company must raise the bar and perform better than the competition to deliver meaningful innovation that customers, communities, and countries can truly benefit from. If we deliver on this, we will emerge stronger and thrive long into the future; it’s as simple as that.
I want to extend my deepest thanks and gratitude to everyone who has contributed to Microsoft up to this point and to all of you who will continue to contribute as we chart our path ahead. Thank you for the focus, dedication, and resilience you demonstrate for Microsoft and our customers and partners each day.