Updated from July 4 with additional information.
Microsoft Inc. (MSFT) is doubling down on its efforts to move to the cloud.
The Puget Sound Business Journal reported last week that the software giant could announce a round of layoffs this week that could affect thousands of employees in Microsoft's Worldwide Commercial Business, which falls under its global sales and marketing group, citing sources close to the situation. The reported layoffs are likely a part of a larger plan to increase Microsoft's emphasis on cloud services, as it pivots away from legacy software applications.
Microsoft sent an internal memo to employees this week detailing how it plans to reorganize its sales teams, according to GeekWire, which obtained a copy of the memo. Representatives from Microsoft wouldn't comment on the reported layoffs, but confirmed that an internal memo was sent out to employees this week announcing changes to its global sales structure.
"Microsoft is implementing changes to better serve our customers and partners," a Microsoft spokesperson told The Street.
The memo doesn't mention anything about layoffs; instead, it describes how the customer model in its commercial and consumer businesses will be broken into two segments: enterprise and small, medium and corporate customers, GeekWire reported. The enterprise unit will now focus on six markets, including manufacturing, financial services, retail, health, education and government.
The memo also signals that further changes may be announced to employees this week.
"Over the past year, we have made changes to how we operate internally with an eye on improving the customer, partner and employee experience," Microsoft wrote."Your leaders will share the specific details about these changes in the coming days."
Microsoft typically announces job cuts at the beginning of its fiscal year. The company's fiscal year 2016 ended on Friday.
The company has been trimming its workforce and overhauling its sales force for several years now. In 2016, the company laid off 2,850 jobs, 900 of which were from its sales unit, after letting go 7,800 employees in 2015. Its largest-ever round of layoffs was in 2013, when Microsoft axed 18,000 employees. Nearly 13,000 of those employees were let go as a result of Microsoft's $7 billion acquisition of Nokia's (NOK) devices and services unit.
While the layoffs may come at the cost of employees' jobs, Patrick Moorhead, founder of Moor Insights & Strategy, said it's an essential part of CEO Satya Nadella's strategy at the company.
"I consider this more of a rotation, in terms of getting the new skills to be able to sell and market what is the future for them," Moorhead said. "The future for them is cloud services."
"I would expect more layoffs for the next few years," he added.
Microsoft will likely add new employees after the round of layoffs -- as it has in the past -- that are equipped to market the company's Azure cloud products, Moorhead explained. Microsoft has been increasingly promoting its Azure Stack technology, which lets businesses run the company's cloud computing platform on their own servers instead of Microsoft's data centers.
Silicon Valley giants including Microsoft, Amazon.com Inc. (AMZN) , Alphabet Inc.'s (GOOGL) Google, IBM Corp. (IBM) , Salesforce.com Inc. (CRM) and Oracle Corp. (ORCL) have all been jockeying for position among cloud computing providers. Microsoft hopes that Dynamics (its customer relationship management software) and Azure Stack, which is due out in mid-2017, will help it move "vertically," i.e. gain entrance to more specialized markets such as healthcare and financial services, Moorhead said.
"If they're going up against people like Oracle and Salesforce, they need a lot more people doing a lot more vertical sales jobs," Moorhead noted. "This is the story of every company that has been successful in enterprise and Microsoft has done a really good job on this so far."
Microsoft is still second to Amazon Web Services in the public cloud, but is establishing a lead in the enterprise cloud market, ahead of companies such as IBM, in large part due to its legacy. AWS is attractive to developers and startups, but Microsoft has a massive installed base of Windows servers in the enterprise, Moorhead said.
"They know this stuff like the back of their hand because of their legacy," Moorhead added.
The rumored layoffs will help them make a cleaner move into the enterprise cloud arena, he added.
Microsoft's shares rose 1.6% to $69.23 early Wednesday afternoon.
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