Innovation
Microsoft to cut 18,000 jobs in next 12 months with 12,500 from ex-Nokia unit
By Michael Hennigan, Finfacts founder and editor
Jul 17, 2014 - 2:07 PM

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Microsoft's founding employees gathered in 1978 to take a portrait before the company moved to Washington State from Albuquerque, New Mexico. Front row (left to right): Bill Gates, Andrea Lewis, Marla Wood, and Paul Allen. Middle row: Bob O'Rear, Bob Greenberg, Marc McDonald, and Gordon Letwin. Back row: Steve Wood, Bob Wallace, and Jim Lane. Not pictured is Miriam Lubow. Courtesy of Microsoft

Microsoft announced today that it plans to cut as many as 18,000 jobs, or 14% of its work force, over the next year, part of a retooling plan in response to the acquisition of Nokia's mobile phone business. Some 1,100 jobs to be lost in Finland from a payroll of 5,000.

About 12,500 will be professional and factory positions eliminated through synergies with the Nokia operations. The acquisition boosted Microsoft's employee total to more than 120,000 from 99,000, The Wall Street Journal reported last week.

In fiscal 2013 ending Microsoft's revenues were $78bn (€57.5bn) and its net income was $22bn (€19.8bn).

The Journal said Microsoft demonstrated in April that its corporate profit engine was steaming along under its new boss during his first quarter at the helm. The software giant posted strong quarterly sales from office tools, database and others programs for computer centers that historically account for the majority of its profit.

Staff were sent an email today from Satya Nadella, Microsoft's chief executive.

From: Satya Nadella

To: All Employees

Date: July 17, 2014 at 5:00 a.m. PT

Subject: Starting to Evolve Our Organization and Culture

Last week in my email to you I synthesized our strategic direction as a productivity and platform company. Having a clear focus is the start of the journey, not the end. The more difficult steps are creating the organization and culture to bring our ambitions to life. Today I’ll share more on how we’re moving forward. On July 22, during our public earnings call, I’ll share further specifics on where we are focusing our innovation investments.

The first step to building the right organization for our ambitions is to realign our workforce. With this in mind, we will begin to reduce the size of our overall workforce by up to 18,000 jobs in the next year. Of that total, our work toward synergies and strategic alignment on Nokia Devices and Services is expected to account for about 12,500 jobs, comprising both professional and factory workers. We are moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months. It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas. My promise to you is that we will go through this process in the most thoughtful and transparent way possible. We will offer severance to all employees impacted by these changes, as well as job transition help in many locations, and everyone can expect to be treated with the respect they deserve for their contributions to this company.

Later today your Senior Leadership Team member will share more on what to expect in your organization. Our workforce reductions are mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment.

First, we will simplify the way we work to drive greater accountability, become more agile and move faster. As part of modernizing our engineering processes the expectations we have from each of our disciplines will change. In addition, we plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making. This includes flattening organizations and increasing the span of control of people managers. In addition, our business processes and support models will be more lean and efficient with greater trust between teams. The overall result of these changes will be more productive, impactful teams across Microsoft. These changes will affect both the Microsoft workforce and our vendor staff. Each organization is starting at different points and moving at different paces.

Second, we are working to integrate the Nokia Devices and Services teams into Microsoft. We will realize the synergies to which we committed when we announced the acquisition last September. The first-party phone portfolio will align to Microsoft’s strategic direction. To win in the higher price tiers, we will focus on breakthrough innovation that expresses and enlivens Microsoft’s digital work and digital life experiences. In addition, we plan to shift select Nokia X product designs to become Lumia products running Windows. This builds on our success in the affordable smartphone space and aligns with our focus on Windows Universal Apps.

Making these decisions to change are difficult, but necessary. I want to invite you to my monthly Q&A event tomorrow. I hope you can join, and I hope you will ask any question that’s on your mind. Thank you for your support as we start to take steps forward in evolving our organization and culture.

Satya

Microsoft's original employees got together to reshoot the famous 1978 photo in April 2008. Front row (left to right): Bill Gates, Andrea Lewis, Miriam Lubow, Marla Wood, and Paul Allen. Back row: Bob O'Rear, Steve Wood, Bob Greenberg, Marc McDonald, Gordon Letwin, and Jim Lane. Not pictured is Bob Wallace, who had died. Courtesy of Microsoft


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