DAVOS, Switzerland, Jan 18 (Reuters) – Microsoft Corp ( MSFT.O ) on Wednesday said it would cut 10,000 jobs and take a $1.2 billion charge to cut profits, as its cloud-based customers reassess their spending and the company faces a recession. .
The cuts add to the tens of thousands announced in recent months in the tech sector, which has seen a decline in growth during the pandemic.
The news comes even as the software developer plans to increase investment in artificial intelligence in what the industry sees as a new bright spot.
In a letter to employees, CEO Satya Nadella tried to address the differences between the different parts of the business.
Customers want to “optimize their digital spending to do more with less” and “be careful because some parts of the world are at risk and some parts are waiting,” he said. “At the same time, the next big area of computing is being born with the advancement of AI.”
Nadella said the layoffs, which affect at least 5% of Microsoft’s workforce, will end at the end of March, with notices beginning Wednesday.
However, Microsoft will continue to hire “in a positive environment,” he said. AI should be one of those areas. Nadella this week presented AI to world leaders gathered in Davos, Switzerland, saying the technology will revolutionize things and affect people around the world.
Microsoft has looked to add to its $1 billion investment in OpenAI, the startup behind the Silicon Valley chatbot sensation called ChatGPT, which Microsoft plans to sell soon through its cloud service.
Shares of the Redmond, Washington-based company ended up 2% lower on Wednesday.
The announcement coincides with the start of layoffs at its retail and cloud service rival Amazon.com Inc ( AMZN.O ), which began notifying workers on Wednesday of its 18,000 job cuts.
In internal documents seen by Reuters, Amazon said affected employees in the United States, Canada and Costa Rica would be notified by the end of the day. Employees in China will be notified after the Chinese New Year.
Facebook parent Meta Platforms Inc ( META.O ) announced 11,000 job cuts, while cloud software company Salesforce Inc ( CRM.N ) said it would cut 10% of its 80,000 employees.
Overall, in 2022, more than 97,000 technology job cuts have been announced, which is the highest in the sector since 2002, when 131,000 cuts were announced, according to publishing company Challenger, Gray & Christmas.
“We haven’t seen this since the dot-com boom,” said Andrew Challenger, the company’s vice president.
Microsoft is laying off 878 full-time employees at its Redmond headquarters, according to updates on Washington State’s Worker Adjustment and Retraining Notification (WARN) website. Under US law, most employers must report layoffs that affect 50 or more employees at one location.
THE GROWTH OF SPECIES IS DECREASED
Microsoft’s $1 billion revenue will cut profits by 12 cents in the second fiscal quarter this year, and could outpace the tech sector, some analysts say.
“This is one of the marquee growth companies that has mixed users saying that maybe the economy is not as good as we think,” said Brian Frank, portfolio manager of Frank Funds, which owns Microsoft shares. over the past few years.
The lawsuit stems from differentiated pricing and changes in Microsoft’s systems and rental integration to create more work environments, Nadella said.
Microsoft declined to elaborate on the hardware changes or say whether it would discontinue any product lines.
Microsoft’s cloud revenue has risen in recent years from an explosion in the need for companies to take data online and manage computers in the so-called cloud. But growth slowed to 35% in the first fiscal quarter of 2023, and the company is looking to cool things down. In July last year, it said a few positions had been cut.
Jeffrey Dastin reports in Davos and Yuvraj Malik, Akash Sriram and Nivedita Balu in Bengaluru; additional reporting by David Randall in New York; Edited by David Gaffen, Nick Zieminski and Rosalba O’Brien
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