Microsoft Cuts Staff By 14%, Nokia Hardest Hit

Microsoft plans to reduce its workforce by as many as 18,000 employees -- or about 14% -- the software giant said Thursday.

Microsoft CEO Satya Nadella -- who telegraphed the move in an email last week -- said most of the cuts will be felt within its recently acquired Nokia phone business.

“Nokia Devices and Services is expected to account for about 12,500 jobs, comprising both professional and factory workers,” Nadella explained in a letter published on Thursday.

At Microsoft, sales, marketing and engineering departments will be negatively impacted, although details remain scarce. The reductions are expected to result in a pretax charge of $1.1 billion to $1.6 billion, according to the company.

Nadella, who said most of the restructuring will occur over the next six months, noted that Microsoft will also be adding roles in certain “strategic areas.”

Since stepping in for Steve Ballmer earlier this year, Nadella has stressed the importance of accountability and strategic agility in countering Microsoft’s highly corporate culture.

Running with those themes, Nadella said this week: “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,” Nadella explained. “In addition, our business processes and support models will be more lean and efficient with greater trust between teams.

In the near term, Nadella’s greatest challenge will likely be integrating Nokia’s Devices and Services teams into Microsoft. The new leader previously promised to turn the Nokia deal into some $600 million in annual savings. To do so, he plans to realign the business’s first-party phone portfolio, among other measures.

“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,” Nadella said on Thursday. “In addition, we plan to shift select Nokia X product designs to become Lumia products running Windows.”

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1 comment about "Microsoft Cuts Staff By 14%, Nokia Hardest Hit".
  1. Adam Hartung from spark partners , July 28, 2014 at 2:33 p.m.
    Great column Gavin. Today Forbes pointed out that a weakened Microsoft is at risk of losing its Value Added Reseller channel to a powerful Apple + IBM partnership - which could doom the former market leader http://onforb.es/1pmyGZa