Microsoft Confirms Thousands of Job Cuts as Company Restructures

The majority of job losses will be sales positions located outside the U.S.

Subscription News: Microsoft Confirms Thousands of Job Cuts as Company Restructures

Source: Microsoft

Last week we reported Microsoft’s (NASDAQ: MSFT) plan to reorganize the company to refocus its efforts on its growing cloud business. The announcement was made to Microsoft staff in an internal memo last week, but the memo did not include any mention of staffing changes, which had been rumored by news outlets, including Bloomberg, the previous week. Microsoft has now confirmed that thousands of employees will be laid off, reports TechCrunch.

The restructuring plan will divide Microsoft’s customer base into two segments: enterprise customers and small, medium and corporate (SMC) customers. GeekWire reports that Microsoft is planning to create new teams and centralize functions to better support their customers and partners.

You May Be Interested In:

Upcoming September Webinar Line-Up

Don't miss our exciting line up covering revenue growth through data,
B2B subscription channel sales and COVID impacted trends in retention and payments.


IoT, SmartBike, and Subscriptions

How to Grow B2B Revenue
by Managing Omni-Channel Sales Conflict


Retention and Payments 
In 2020

Wednesday,
Sept. 2nd at 1 PM EDT

Thursday,
Sept. 10th at 1 PM EDT

Wednesday,
Sept. 16th at 1 PM EDT

REGISTER NOW

REGISTER HERE

REGISTER

According to CNBC, about 3,000 jobs will be cut without about three-fourths of those cuts coming from overseas positions. CNBC reports that the cuts are not being made to cut costs, but to restructure how the company handles sales. Business Insider reports that most of the jobs will come from sales positions and as many as 5,000 jobs could be cut.  

According to Microsoft, the company employs about 121,500 around the world with 71,500 in the U.S. alone. Here’s how today’s employment figures compare to the previous four years.

Fiscal year ended

Employee Head Count

Net Revenue

June 30, 2013

99,139

$77.85 billion

June 30, 2014

128,076

$86.83 billion

June 30, 2015

117,354

$93.58 billion

June 30, 2016

114,074

$85.32 billion

March 31, 2017

121,567

Not yet reported for FYE

 

Microsoft issued a brief statement about the layoffs:

“Microsoft is implementing changes to better serve our customers and partners. Today, we are taking steps to notify some employees that their jobs are under consideration or that their positions will be eliminated. Like all companies, we evaluate our business on a regular basis. This can result in increased investment in some places and, from time-to-time, re-deployment in others.”

In related news, earlier this week at the Microsoft Inspire conference, Nadella released details of Microsoft 365: Microsoft 365 Enterprise and Microsoft 365 Business, products that combine Office 365, Windows 10 and Enterprise Mobility + security.

“The workplace is transforming-from changing employee expectations, to more diverse and globally distributed teams, to an increasingly complex threat landscape. From these trends, we are seeing a new culture of work emerging. Our customers are telling us they are looking to empower their people with innovative technology to embrace this modern culture of work,” said Kirk Koenigsbauer, corporate vice president for the Office team in a statement.

With more than 100 million commercial monthly active users of Office 365, and more than 500 million Windows 10 devices in use, Microsoft is in a unique position to help companies empower their employees, unlocking business growth and innovation.”

Investors have not had a significant reaction to the news. Microsoft confirmed the layoffs on July 6. At the end of trading on July 6, stock dipped slightly to $68.57 per share from $69.08 the previous day. At 5:43 PM EDT on July 12, Microsoft stock was valued at $71.15. On July 12, 2016, stock was valued at $53.12 per share. Microsoft 365 Enterprise will be available August 1 in two plans, E3 and E5. Microsoft Business, designed for small to medium busiensses with up to 300 employees can be previewed on August 2. It will be priced at $20 per user per month.

Subscription News: Microsoft Confirms Thousands of Job Cuts as Company Restructures

Source: Google Finance – Yahoo Finance – MSN Money

Insider Take:

Microsoft’s fiscal year ended on June 30, 2017, and the company has traditionally announced reorganizations and staff layoffs at its fiscal year end, so the timing of the announcement isn’t a surprise. Its move is consistent with statements CEO Satya Nadella made in the company’s fiscal year third quarter 2017 press release:

Subscription News: Microsoft Confirms Thousands of Job Cuts as Company Restructures

Source: Microsoft

“Our results this quarter reflect the trust customers are placing in the Microsoft Cloud. From large multi-nationals to small and medium businesses to non-profits all over the world, organizations are using Microsoft’s cloud platforms to power their digital transformation,” said Nadella.

Amy Hood, executive vice president and chief financial, echoed Nadella’s comments.

“Strong execution and demand for our cloud-based services drove our commercial cloud annualized revenue run rate to more than $15.2 billion,” Hood said.

While job losses are always concerning, in this case, they represent a small portion of Microsoft’s total employee count and appear to be necessary to shift the company’s focus to leverage its success in cloud computing.