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Tech job cuts spread, Microsoft lays off 10,000

Microsoft lays off 10,000 jobs, nearly 5% of its workforce, joining other tech companies which scaled back their expansions from the pandemic era.

The company said in a regulatory filing on Wednesday that the layoffs were in response to “macroeconomic conditions and changing customer priorities.”

The Redmond, Washington-based software giant said it would also make changes to its hardware portfolio and consolidate the locations of its leased offices.

Microsoft is cutting far fewer jobs than it added during the COVID-19 pandemic as it responds to a boom in demand for its workplace software and cloud computing services with so many people working and learning from home.

“A lot of this is just over-hiring,” said Joshua White, a finance professor at Vanderbilt University.

Microsoft’s workforce has grown by about 36% in the two fiscal years since the outbreak of the pandemic, from 163,000 workers at the end of June 2020 to 221,000 in June 2022.

The layoffs represent “less than 5 percent of our total employee base, with some announcements occurring today,” CEO Satya Nadella said in an email to employees.

“While we are eliminating roles in some areas, we will continue to hire in key strategic areas,” Nadella said. He emphasized the importance of building a “new computing platform” using advances in artificial intelligence.

He said customers who accelerated their digital spending during the pandemic are now trying to “optimize their digital spending to do more with less.”

“We also see that organizations in every industry and geography are cautious as some parts of the world are in recession and others are expecting one,” Nadella wrote.

Other tech companies have also been cutting jobs amid concerns about a slowing economy.

Amazon and business software maker Salesforce announced major job cuts earlier this month as they reduce payrolls that have expanded rapidly during the pandemic lockdown.

Amazon said it would cut about 18,000 positions. It’s the biggest set of layoffs in the Seattle company’s history, though just a fraction of its global workforce of 1.5 million.

Facebook parent Meta is laying off 11,000 people, about 13% of its workforce. And Elon Musk, Twitter’s new CEO, has cut the company’s workforce.

Nadella did not directly mention the layoffs Wednesday when he appeared at the World Economic Forum’s annual meeting happening this week in Davos, Switzerland.

Asked by forum founder Klaus Schwab what the tech layoffs meant for the industry’s business model, Nadella said companies that boomed during the COVID-19 pandemic are now seeing a “normalization” of that demand.

“Frankly, we in the tech industry are going to have to become efficient as well, right?” Nadella said. “It’s not about everyone else doing more with less.” We will have to do more with less. So we’re going to have to show our own productivity gains with our own kind of technology.”

Microsoft declined to answer questions about where layoffs and office closings would be concentrated. The company sent notice to Washington state employment officials on Wednesday that it is laying off 878 workers at its offices in Redmond and the nearby cities of Bellevue and Issaquah.

As of June, it had 122,000 workers in the US and 99,000 elsewhere.

White, the Vanderbilt professor, said all industries are looking to cut costs ahead of a possible recession, but technology companies may be particularly sensitive to rapidly rising interest rates, a tool used aggressively in recent months by the Federal Reserve in its fight against inflation.

“This hits tech companies a little harder than industry or consumers, because a huge chunk of Microsoft’s value is on projects with cash flows that won’t pay off for several years,” he said.

Among the projects that have gained attention recently is Microsoft’s investment in its San Francisco startup partner OpenAI, maker of the ChatGPT writing tool and other artificial intelligence systems that can generate readable text, images, and computer code.

Microsoft, which owns the Xbox gaming business, also faces regulatory uncertainty in the US and Europe is delaying its planned $68.7 billion takeover of video game company Activision Blizzard, which had about 9,800 employees as of a year ago.

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AP Business writer Kelvin Chan contributed to this story from London.

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