Jan 18 (Reuters) – Microsoft Corp (MSFT.O) The company cut 10,000 jobs and took a $1.2 billion charge on Wednesday as its cloud-computing customers split their costs, saying the company will weather the slowdown.
The layoffs, far larger than Microsoft’s cuts last year, have piled up tens of thousands of job cuts in the tech sector, which has outpaced its relentless growth during the pandemic.
The news is particularly dramatic for Microsoft, a software maker that has invested heavily in artificial intelligence, which represents an industry bright spot.
In a memo to employees, Chief Executive Satya Nadella said the layoffs, which affect less than 5% of the workforce, will end by the end of March, with announcements beginning Wednesday.
The timing coincides with that of rival Amazon.com Inc (AMZN.O) It said more employees would be notified of its own 18,000-person layoffs.
Nadella said customers want to reduce their digital spending and “be cautious as some parts of the world are in a recession while other parts are expecting one.” Another company that serves enterprises is Palantir Technologies Inc (PLTR.N)It said this week that reducing cloud costs is a top ten priority for its customers.
In addition to severance costs, Microsoft will take a billion-dollar charge from changes in its hardware product line and consolidation of leases, “as we create more density across our workforce,” Nadella said.
The charge represents a negative impact of 12 cents per share on earnings in the second quarter of fiscal 2023, Microsoft said.
Wedbush Securities analyst Dan Ives said, “This is a Band-Aid moment to protect margins and reduce costs in a soft macro, which the Street will continue to appreciate.”
Microsoft shares were up less than 1%.
Nadella said the company will continue to invest capital and talent in strategic areas that offer services such as OpenAI’s ChatGPT, a futuristic chatbot that has caught the attention of AI and Silicon Valley.
“The next big computing wave is being born with advances in AI as they transform the world’s most sophisticated models into a new computing platform,” he said.
Microsoft said in July of last year that a small number of roles had been cut, and in October news site Axios reported that the company had laid off fewer than 1,000 employees across multiple divisions.
The company is struggling with a slump in the personal computer market after an epidemic boom petered out, leaving little demand for its Windows and associated software.
Reporting by Jeffrey Dustin in Davos and Yuvraj Malik and Akash Sriram in Bangalore; Editing by Shinjini Ganguly and Nick Zieminski
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