Microsoft expects to cut 10,000 workers through its third fiscal quarter, according to a publicly posted memo from CEO Satya Nadella.
Engadget writes that by making the change, Microsoft's cost structure will be in line with the industry demand and the company revenue.
The Company Says That The Cuts Were Strategic
Microsoft stated on Wednesday that it would be making 10,000 layoffs as part of its efforts to reduce expenses in the face of mounting worries about a wide-spread economic downturn.
It can be remembered that during the height of the pandemic, customers increased their digital spending, but they are now reducing it, according to Nadella.
As certain regions of the world are currently experiencing a recession and others are preparing for one, the company is seeing businesses in every sector and region exercise caution.
With that, less than 5% of Microsoft's 221,000 global employees will be affected by the layoffs, but it is still huge for a company like the tech giant.
Although it remained unclear which departments would be affected, the company started informing affected employees on Wednesday and aims to finish the layoffs by the spring.
Meanwhile, for the severance expenses, combining building leases, and undisclosed adjustments to its hardware assortment, the company will pay a $1.2 billion restructuring charge.
According to Nadella, US employees would receive "above-market" severance compensation, six more months of healthcare coverage, and stock awards, Engadget reports.
In order to keep up with the surge in demand, Microsoft, like other large tech businesses, started hiring extremely quickly during the global pandemic. Since 2019, Microsoft has hired around 75,000 people.
However, as Nadella pointed out in his letter to the staff, customers are already making do with less, and many analysts anticipate a general decline in the economy in 2023.
"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," Nadella says.
Read More: Microsoft To Lay Off Thousands Of Employees This Week, Reports Suggest
This Is The Biggest Layoff As Of Recent As Microsoft Tries To Focus On Other Areas
This is Microsoft's second-largest round of layoffs after 18,000 were made in 2014 as a freshly promoted Nadella reduced the company's hardware sector.
Aside from an effort to cut costs on employment, the tech giant wants to invest its money on other projects of the business, NPR writes.
It can be remembered that the AI startup OpenAI, which is behind popular AI tools like Dall-E and ChatGPT, is receiving millions of dollars from the tech giant.
The company has also been expanding its already big video game sector with well-known systems like Xbox.
Among these expansion moves is most notably its recent planned $69 billion acquisition of Activision Blizzard, a deal that is being contested by federal regulators.
The software business said on Wednesday that it will be granting US employees unlimited time off, a decision that was applauded by employees at the company who suspected it was done to enhance morale amid layoffs.
While Microsoft, the third-most valuable corporation in the world, continues to make significant advances, Nadella portrayed the layoffs as a difficult decision they were forced to make.
Related Article: Microsoft Lays Off Hundreds of Employees Across Multiple Divisions, Reports Say
