Microsoft Is Joining The Tech Firing Spree

Sebastien Callebaut -

Microsoft To Lay Off 10,000 Employees

Microsoft Corp. announced it was cutting 10,000 jobs, making it the latest tech giant to do so amid worries about the state of the world economy. The cut adds to the tens of thousands of layoffs that have been announced recently in the technology sector, which has slowed down after experiencing rapid expansion during the pandemic.

For 2023 alone, already over 37,000 employees have been layed off at over 120 tech companies. In 2022, there were at least 154,000 layoffs from more than 1,000 tech companies.

  • In his memo to employees, CEO Satya Nadella made a reference to the global slowdown in the economy, warning them to “exercise caution as some parts of the world are in a recession and other parts are anticipating one.”
  • In connection to the layoffs, Microsoft took a $1.2 billion charge in its latest quarter ending in December for severance costs, building leases, and changes to its hardware portfolio

Declining PC Sales And A Cloud Slowdown Are Squeezing Microsoft

Microsoft's Windows business appears to have been struggling for some time due to diminishing PC sales. According to preliminary figures from research company Gartner Inc., worldwide shipments decreased by 29% in the fourth quarter of last year compared to the same period the year before.

Microsoft's cloud sales have skyrocketed in recent years due to a surge in business demand for online data hosting and processing services provided by the cloud. However, growth from Azure and other cloud services slowed to 31% in the current quarter frorm 35% in the previous quarter. Microsoft anticipates further drops.

  • Before making the layoffs public, Nadella said the tech sector must get ready for more challenging times when speaking at the World Economic Forum in Davos, Switzerland
  • “We in the tech industry will have to get more efficient—it’s not about everyone else doing more with less, we will have to do more with less. We will have to show our own productivity gains,” Nadella said

AI: A Strategic Area In Which Microsoft Will keep Hiring

Microsoft will continue to hire in "strategic areas" and one of those will be AI. At the World Economic Forum in Davos, Nadella praised AI after calling it “the next major wave of computing.”

Microsoft announced on Monday it would raise its investment in OpenAI, on top of the $1 billion it has already invested in the company. According to Semafor, Microsoft is in discussions to invest around $10 billion in OpenAI. Microsoft did not disclose any dollar amount.

  • Following Microsoft's prior investments in 2019 and 2021, the agreement marks the third phase of the collaboration
  • According to Microsoft, the alliance will help both businesses commercialize cutting-edge technologies in the future and will accelerate AI advances
  • Open AI is a startup in artificial intelligence known for its ChatGPT chatbot, which went live just over a month ago and has rapidly gained popularity

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

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