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Microsoft Slicing 18,000 Jobs: More Change Ahead

Microsoft announces largest layoff in its history as it restructures and integrates recently acquired Nokia devices unit. CEO Satya Nadella promises sweeping organizational changes.

Microsoft Office For iPad Vs. iWork Vs. Google
Microsoft Office For iPad Vs. iWork Vs. Google
(Click image for larger view and slideshow.)

Microsoft will slash 18,000 jobs from its payroll during the next 12 months, the company announced on Thursday, with the majority of the cuts to occur by the end of the year.

The headcount reduction, which amounts to roughly 14% of Microsoft's global workforce, is the largest in company history. Roughly 12,500 of the eliminated positions will come from integrating Microsoft's recently acquired Nokia Devices and Services Division; the deal to buy Nokia closed in April. Microsoft had more than 127,000 employees worldwide as of the beginning of June.

"Our workforce reductions are mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment," Microsoft CEO Satya Nadella told employees in an email. Microsoft EVP Stephen Elop, who joined the company as part of the Nokia acquisition, sent a separate email to Microsoft Devices staff.

[More challenges ahead for Windows Phone. Read Apple-IBM Deal: Trouble For Google, Microsoft.]

Nadella's recent public comments, including a company-wide memo and his keynote address at Microsoft's Worldwide Partner Conference, have continued to lay out his course for Microsoft's near- and long-term future. That direction includes a considerable reshaping of predecessor Steve Ballmer "devices and strategies" mantra to "productivity and platform," with the former term especially becoming a touchstone for Nadella's vision and team.

If you take Nadella at his word, the job cuts aren't simply a cost-cutting measure, as is sometimes the case in corporate downsizings, but a first step toward sweeping changes to how Microsoft operates.

"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," Nadella wrote in his email. That shift, even broadly described, makes sense given Microsoft's recent "mobile-first, cloud-first" drumbeat: if you want to sing that refrain, the development and testing cycles of the shrink-wrapped software of yore won't cut it.

It would appear, too, that the job cuts won't all come from the trenches. Nadella indicated Microsoft's org chart may look quite different by this time next year: "We plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making," he wrote. "This includes flattening organizations and increasing the span of control of people managers."

In his own email, Elop outlined changes to devices strategy and operations, with most of the changes coming to phones, including a consolidation of the Smart Devices and Mobile Phones units into a single phone division. In previewing the upcoming restructuring, Elop noted that while phones were the business previously at Nokia, they're only part of the business at Microsoft. Microsoft intends to drive Windows Phone adoption in the near term by targeting the rapidly growing market for lower-priced devices with its Lumia devices. It will also redirect select Nokia X devices to the affordable phone market.

On the higher end of the smartphone market, Elop said, "We will focus on delivering great breakthrough products in alignment with major milestones ahead from both the Windows team and the Applications and Services Group."

Nadella told Microsoft employees that, in spite of the deep cuts, "we will be adding roles in other strategic areas," though he didn't offer specifics.

Microsoft said it expects to take pre-tax charges related to the restructuring of up to $1.6 billion over the next four quarters, including between $750 and $800 million in severance and benefits costs from the staff reduction. The layoffs will be completed by June 30, 2015, with most of the cuts occurring much sooner, according to the company.

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Kevin Casey is a writer based in North Carolina who writes about technology for small and mid-size businesses. View Full Bio

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danielcawrey
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danielcawrey,
User Rank: Ninja
7/20/2014 | 5:17:07 PM
Re: Microsoft is so Legacy
I think it should be less about features and more about mobile going forward. Windows is a desktop interface, something people use when sitting down. What's Microsoft done for mobile and wearables? Not enough. Nothing compelling enough for people to use. 

The company still does well in the enterprise and that has helped them. But the total ecosystem is fragmented. All of the people using Windows desktops and laptops are in general using a different company's platform for mobile. 
VB6 programming
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VB6 programming,
User Rank: Apprentice
7/19/2014 | 12:57:21 PM
Re: Satya Nadella is going to make tough decisions
And the other 40% are invented. Usually by Microsoft.

 
Somedude8
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Somedude8,
User Rank: Ninja
7/19/2014 | 12:07:15 PM
Re: Satya Nadella is going to make tough decisions
75% of all internet statistics are made up.
VB6 programming
0%
100%
VB6 programming,
User Rank: Apprentice
7/19/2014 | 11:58:50 AM
Re: Satya Nadella is going to make tough decisions
Microsoft have just announced their share of operating systems has fallen from 90% to 14%.

 
progman2000
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progman2000,
User Rank: Ninja
7/19/2014 | 11:05:25 AM
Re: Microsoft is so Legacy
Saying MS is on a "downward spiral to irrelevancy" sounds a little doomsday-ish to me.  People were saying the same thing about Apple 15 years ago and they seemed to have done alright.

Hates gonna hate - might actually be a good time to pickup some MS stock, hmmm...
PaulS681
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PaulS681,
User Rank: Ninja
7/18/2014 | 8:40:22 PM
Re: Microsoft is so Legacy
@Thomas... I would settle for them getting feedback from users rather than some group of techies trying to figure out on their own what most people would like.
PaulS681
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PaulS681,
User Rank: Ninja
7/18/2014 | 8:32:29 PM
Re: Satya Nadella is going to make tough decisions
Isn't MS still the number 1 OS out there? Sure it's not perfect but it's not a terrible product. I would never say never but I think MS will be around and revelant for a while.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
7/18/2014 | 6:04:29 PM
Re: Microsoft is so Legacy
>Would not surprise me if Win 7 ends up being used longer than XP was/is.

Maybe Microsoft should focus on developing Windows features so compelling that people actually want to upgrade. Wouldn't that be something?
jastroff
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jastroff,
User Rank: Ninja
7/18/2014 | 10:38:39 AM
Re: MS not immune
Everybody wins! Well, almost...

>> Microsoft said it expects to take pre-tax charges related to the restructuring of up to $1.6 billion over the next four quarters, including between $750 and $800 million in severance and benefits costs from the staff reduction.
Technocrati
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0%
Technocrati,
User Rank: Ninja
7/17/2014 | 8:13:58 PM
Re: Satya Nadella is going to make tough decisions

Windows keeps taking over a larger share of the enterprise data center. 

 

@Charlie Babcock    Interesting.  I have been out of the Windows loop for about five years now.  Is it the server OS that causes you to state this ?     Virtualization ?   I have been in the linux world lately so I am not quite sure how enterprises are still using windows especially in the Data Center.

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