Microsoft to cut 10,000 jobs

Microsoft, which employs thousands of staff in Ireland, said on Wednesday it would cut 10,000 jobs, the latest sign that lay-offs were accelerating in the US technology sector as companies brace for an economic downturn.

The lay-offs will result in a charge of $1.2 billion (€1.1 billion) in the second quarter of fiscal 2023, representing a negative impact of 12 cents on per share profit, Microsoft said.

The computing giant employs some 3,500 people in the Republic but there is no clarity so far on how the Irish operations might be affected by the cull.

The lay-off, far larger than cuts by Microsoft last year, piles on to tens of thousands of job cuts across the technology sector that is long past its ceaseless growth during the pandemic.

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The news is particularly dramatic for Microsoft, a software maker heavily invested in generative artificial intelligence that represents an industry bright spot.

In a note to employees, chief executive Satya Nadella said the lay-offs, affecting less than 5 per cent of the workforce, would conclude by the end of March, with notifications beginning Wednesday. This level of cuts would equate to fewer than 175 jobs in Ireland.

The timing corresponds with the date its rival Amazon has said more employees will be notified in its own 18,000-person lay-offs.

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Mr Nadella said customers wanted to “optimise 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 line-up of hardware products and from consolidating leases “as we create higher density across our workspaces,” Mr Nadella said.

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The charge in the second quarter of fiscal 2023 represents a negative impact of 12 cents per share profit, Microsoft said.

Wedbush Securities analyst Dan Ives said, “This is a rip the band-aid off moment to preserve margins and cut costs in a softer macro, a strategy the Street will continue to applaud.”

Microsoft shares were up less than 1 per cent.

Mr Nadella said the company would continue to invest capital and talent in strategic areas, such as AI and a service offering OpenAI’s ChatGPT, a futuristic chatbot that has captivated Silicon Valley.

“The next major wave of computing is being born with advances in AI, as we’re turning the world’s most advanced models into a new computing platform,” he said.

Microsoft said in July last year that a small number of roles had been eliminated, while news site Axios in October reported that the company had laid off under 1,000 employees across several divisions.

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.

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Among Microsoft’s businesses here, the company has an engineering hub at its campus in Leopardstown in south Dublin. In 2020 it employed about 600 engineering staff at the hub and planned to add another 200.

It also owns LinkedIn, which itself has a significant presence in Ireland. Last year LinkedIn said it would seek to sublet office space it had leased for expansion in Dublin, amid the move to more working from home generally after the pandemic. It is not yet clear if LinkedIn will be impacted by the job cuts.

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A Microsoft Ireland spokesperson declined to comment on Tuesday.

The expected lay-offs would be the latest by a big technology firm with a major presence in Ireland. Twitter, Facebook owner Meta Platforms and payments firm Stripe have all moved to slash employee numbers, resulting in hundreds of job losses overall at their Irish operations. Amazon too is aiming to cut about 18,000 staff globally while Salesforce, Zendesk and Intercom have laid off staff too. – Additional reporting: Reuters/Bloomberg