Microsoft Corp. said it will eliminate as many as 18,000 jobs, the largest round of cuts in its history, as Chief Executive Officer Satya Nadella integrates Nokia Oyj’s handset unit and slims down the software maker. The restructuring, amounting to about 14 percent of its workforce, includes 12,500 Nokia factory and professional positions – half the number of employees added in the acquisition. At Microsoft, cuts will be in sales, marketing and engineering. The reductions are expected to be completed by June 30, 2015, and will result in a pretax charge of $1.1 billion to $1.6 billion, Microsoft said in a statement Thursday.
Nadella, who took over from Steve Ballmer in February, is retooling the company’s structure as it seeks to compete with nimbler rivals offering mobile and Internet-based software and services. He’s also working to wring a promised $600 million in annual savings from Microsoft’s Nokia deal, which added 25,000 workers in April, bringing the total to about 127,100.
“Microsoft needs to be a leaner tech giant over the coming years in order to strike the right balance of growth and profitability around its cloud and mobile endeavors,” said Daniel Ives, an analyst at FBR Capital Markets & Co. The cuts are roughly twice as big as Wall Street expected, Ives said in a note.
The shares closed up 1 percent to $44.53. They have advanced 19 percent this year.
The company will start with 13,000 cuts and the majority of eliminated workers will be notified in the next six months, Nadella said in an e-mail to employees. Microsoft will also have fewer layers of management and will make changes to its outside vendor staff, he said.
“The first step to building the right organization for our ambitions is to realign our workforce,” he wrote.
Last week, in his first mission statement, Nadella said the Redmond, Wash.-based software maker needs to become more focused and efficient, and requires changes to its engineering teams. He pledged updates on the new plans later this month and said he would provide more details when earnings are reported Tuesday.
In appearances at company and technology events since he took the helm, Nadella has reiterated that the company’s priorities are mobile and cloud products, as he works to shift Microsoft away from its longtime core business of software for personal computers. Nadella has signaled a desire to produce software for rival operating systems, like Apple’s iOS and Google’s Android, and has shuffled management in areas like marketing, business development and the Xbox game console. When Microsoft agreed to acquire Nokia’s device unit in September, the software maker pledged $600 million in yearly cost savings in the 18 months after the deal closed. While today’s layoffs are the company’s biggest ever the 5,500 job cuts at Microsoft are smaller than those in 2009.