Microsoft CEO Nadella Signals Job Cuts

by CXOtoday News Desk    Jul 11, 2014


After completing five months as Chief Executive at Microsoft, Satya Nadella is reportedly looking at some organizational changes, which is likely to be by cutting down on its employee count. Although he has not mentioned explicitly, the CEO circulated a 3,000-word email to employees mentioning the urgency to “flatten the organization and develop leaner business processes,” according to a Reuters report.

He also said Microsoft needed to “rediscover our soul,” and defined Microsoft’s mission not as solely a company building software products such as Windows or Office, but also for developing technology to help people live better lives and businesses run more efficiently.

Nadella said he would address detailed organizational and financial issues for the company’s new financial year, when Microsoft reports quarterly earnings on July 22, which is less than ten days away.

A WSJ report mentions that one likely area for cuts would be reducing the overlap resulting from the April acquisition of Nokia’s mobile phone business, which boosted Microsoft’s total of 99,000 employees to more than 120,000, according to people familiar with the matter. The number is far more than its competitors Apple and Google. Analysts expect the company to make some cuts, which would represent Microsoft’s first major layoffs since 2009.

Some Microsoft employees worry that a sweeping organizational reshuffling will be disruptive to employees. As such there has been a major change last year during former CEO Steve Ballmer’s reign when he announced to step down and started a CEO-hunting exercise.

When Nadella took over more than three years ago as head of the division making computer-server and cloud technologies, he merged groups devoted to discrete products, pruned layers of management and made software developers more directly responsible for their products.

Daniel Ives, an equity analyst with FBR Capital Markets, said WSJ that Nadella’s missive was a “reiteration of the company’s commitment toward its cloud/mobile focus, which we think will ultimately help reignite optimism.”

Experts believe for change and consolidation, some kind of realignment in the form of layoffs is inevitable. Therefore Microsoft may not be an exception if it is looking for the next level of growth.