Microsoft gateway sign at Redmond, Washington headquarters

Microsoft Reduces Workforce in ‘Strategic Realignment’

Cuts represent fewer than 1% of Microsoft’s global workforce of 180,000

Microsoft is reducing its workforce as part of a larger “strategic realignment.” The job cuts represent less than 1% of Microsoft’s global workforce of approximately 180,000, reports GeekWire. The workforce reduction coincides with the company’s July 1 fiscal year. Some of the affected jobs include teams such as consulting and customer and partner solutions, according to Bloomberg, but the roles spread across multiple regions.

“Today we had a small number of role eliminations. Like all companies, we evaluate our business priorities on a regular basis, and make structural adjustments accordingly,” Microsoft said in a statement emailed to Bloomberg. “We will continue to invest in our business and grow headcount overall in the year ahead.”

Though fourth quarter and fiscal year-end financials have not yet been released, in the third quarter of fiscal year 2022, Microsoft reported total revenue of $49.4 billion, an 18% increase year-over-year. Revenue increased in virtually every category, including Xbox content and services and Surface revenue, categories that have experienced declines in recent quarters.

Despite this revenue strength, during the third quarter earnings call, chief financial officer Amy Hood said Microsoft is expecting negative impacts in the fourth quarter from a variety of sources, including:

  • Foreign exchange rate
  • A full quarter of impact from the company’s acquisition of Nuance
  • Revenue impact of $110 million due to the war in Ukraine, shutdowns in China, and extended shutdowns impacting Windows OEM, Surface and Xbox hardware sales

“With that context in place, let’s turn to our Q4 outlook. In our largest quarter of the year, we expect our differentiated market position, customer demand across our solution portfolio, and consistent execution to drive another strong quarter of revenue growth,” said Hood.

In the company’s fourth quarter outlook, Hood said she expected Microsoft Cloud’s gross margin percentage would be down a point and that capital expenditures would increase due to strategic investments needed to support growing demand for cloud services. Hood said the company is likely to see a decrease in gaming revenue due to a restricted supply of consoles and lower engagement. This may be why Hulu and Xbox have partnered on a PC Games Pass for Hulu subscribers through July 23, 2022.

The company will report fourth quarter and fiscal year-end financials on July 26, 2022.

Other tech layoffs

In the midst of an uncertain global economy and an economic downturn, other technology-based companies are laying off staff as well.

Amount, a fintech unicorn valued at $1 billion in 2021, laid off 18% of its staff due to the “current macro-economic environment,” reports TechCrunch.

Byju, an edtech company, laid off hundreds of employees at two recently acquired companies Toppr and WhiteHat Jr., says TechCrunch.

Streaming service Netflix announced two rounds of layoffs in recent months, one impacting 150 employees and another impacting 300 employees. The company said slowed growth, competition and global factors beyond their control have negatively impacted their projections, and they need to rightsize to course correct.

Niantic, creator of Pokémon Go, laid off about 90 people last week and stopped production on four projects, reports Fast Company.

Qumulo, a Seattle-based startup that provides data storage, laid off 80 employees last week, representing about 19% of total staff. The company cited the economy and a need to reach profitability as reasons for the layoffs, says GeekWire.

SAP laid off an undisclosed number of workers in late June as part of a larger restructuring. In the Pacific Northwest, fewer than 30 workers were impacted, but the global number of laid off employees is likely to be much higher, says GeekWire.

Newsletter platform Substack laid off 13 of its 90 employees, representing 14.4% of their total staff. The company is concerned about the economic climate and is preparing itself for tough market conditions ahead.

Twitter laid off 30% of its talent acquisition team at the beginning of July, according to TechCrunch. The layoffs came two months after a hiring freeze was implemented, likely because Twitter remains in limbo while the Musk-Twitter saga plays out.

Unity Technologies laid off between 200 and 300 employees, or 4% of its workforce, according to Fast Company.

Insider Take

Workforce reductions are becoming a theme in 2022 as companies rightsize to manage their resources in alignment with current global economic situation. This includes layoffs, the elimination of positions, and strategetic realignments like this one. Inflation as well as other global political and economic factors are playing a part and creating uncertainty for even the biggest of companies. We expect to see more of these organizational changes as we continue into the second half of 2022.

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