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Microsoft Announces a Wave of 10,000 Job Cuts

The software giant is the latest tech company to drastically cut costs to adapt to the economic downturn.
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For the technology sector the focus at the beginning of 2023 looks much like that of the end of 2022: massive job cuts. 

The latest company to slash the workforce is software and cloud-computing giant Microsoft  (MSFT) - Get Free Report. The Redmond, Wash., company co-founded by Bill Gates has just announced the elimination of 5% of its workforce, or 10,000 jobs, to respond to the global economic slowdown.

"As we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less," Chief Executive Satya Nadella said in an email to employees on Jan. 18. 

"We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one."

As a result, Nadella, added "we will align our cost structure with our revenue and where we see customer demand."

Microsoft Plans a $1.2 Billion Charge for the Cuts

This austerity effort will result in a charge of $1.2 billion in the second quarter. The sum essentially consists of severance pay, the boss indicated.

Microsoft's stock hasn't moved much on Wednesday off Tuesday's close at $240.35.

Businesses and consumers, anticipating a global recession, are becoming increasingly cautious about their technology spending, which is hurting the sector. 

In response to these economic worries, the tech groups are slashing costs, including through waves of job cuts. Meta Platforms  (META) - Get Free Report for example, cut 11,000 jobs, a first since the social-networking giant started up in 2004. E-commerce giant Amazon  (AMZN) - Get Free Report said it would eliminate more than 18,000 jobs.

In addition to the job cuts, projects have been abandoned and the pace of recruitment has been greatly slowed. 

Microsoft Will Pick Spots to Invest and Hire

Nadella said Microsoft will continue to invest and hire in priority areas despite these difficult times.

"We will continue to hire in key strategic areas," he said. "We will continue to invest in strategic areas for our future, meaning we are allocating both our capital and talent to areas of secular growth and long-term competitiveness for the company, while divesting in other areas."

"These are the kinds of hard choices we have made throughout our 47-year history to remain a consequential company in this industry that is unforgiving to anyone who doesn’t adapt to platform shifts."

On Jan. 4 Nadella said the tech industry should be prepared for the next two years to be challenging. He said it would face more roadblocks before it recovers.

"I would say the next two years are probably going to be the most challenging, because after all, we did have, you know, a lot of acceleration during the pandemic, and there is some amount of normalization of that demand," Nadella told CNBC.

"There is a real recession in large parts of the world. And so the combination of 'pull forward and recession' means we will have to adjust."