Microsoft on Wednesday confirmed that it would eliminate 10,000 jobs and take a $1.2-billion charge as its cloud customers start cutting their spending.
Microsoft is the second largest cloud infrastructure provider with 22 percent share in Q3 2022, well below main rival Amazon Web Services (AWS) that has 32 percent share, according to Canalys.
Research firm Gartner says spending on Software will increase 9.3 percent to $856.029 billion in 2023 from $783.462 billion in 2022. Spending on devices will drop 5.1 percent to $685.633 billion in 2023 from $722.81 billion in 2022.
Microsoft CEO Satya Nadella, in a note to employees, said the layoffs, affecting less than 5 percent of the workforce, would conclude by the end of March. Satya Nadella indicated that the US-based software giant will start sending notifications to employees beginning Wednesday.
The timing corresponds with the date its rival Amazon.com has said more employees will be notified in its own 18,000-person layoffs, Reuters news report said.
Satya Nadella said customers wanted to optimize their digital spend to do more with less and exercise caution as some parts of the world are in a recession and other parts are anticipating one.
In addition to severance costs, Microsoft would take a billion-dollar charge from changes to its lineup of hardware products and from consolidating leases “as we create higher density across our workspaces, Satya Nadella said.
The charge in the second quarter of fiscal 2023 represents a negative impact of 12 cents per share profit, Microsoft said.
Satya Nadella said the company would continue to invest capital and talent in strategic areas, like AI and a service offering OpenAI’s ChatGPT, a chatbot that has captivated Silicon Valley.
Microsoft said in July last year that a small number of roles had been eliminated.
The company is also grappling with a slump in the personal computer market after a pandemic boom fizzled out, leaving little demand for its Windows and accompanying software.