Last week, Microsoft sent a memo to its staff members announcing a 14% cut of staff due to strategic emphasis on its work with Nokia on smartphones. The cuts are, in part, due to Microsoft inheriting 32,000 employees with its acquisition of Nokia in September 2013. This morning, Microsoft’s CEO Satya Nadella sent another memo to all employs to further inform staff of cuts. The 18,000 jobs to be cut include 12,500 jobs described as “professional and factory workers.” The first 13,000 layoffs will take place over the next six months. Within the memo, Nadella explains the strategy involved with the cuts along with Microsoft’s intention to offer severance to all employees affected.
The main purpose of these cuts, according to the Nadella, were described as the following:
“Our workforce reductions are mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment.” In addition, these changes are driven by Microsoft’s pledge to cut $600 million of costs within 18 months acquiring Nokia.
Meanwhile, the cuts are being favored by Wall Street and shareholders who have seen Microsoft as an overly large company since the acquisition. Today MSFT’s stock price opened at 45.45 this morning and as of 11 am has dropped a dollar to 44.40. On Thursday, Microsoft went up 2.8% in pre-market. Shares have gone up over 25% under Nadella’s leadership so far.
Microsoft also explained that Nokia devices will be further embedded with Microsoft, especially in Nokia X product design, which currently runs Google’s competing smartphone OS, Android. This means Microsoft will almost definitely halt all plans for Nokia devices to include Android in attempt to keep a competing market share of its OS on more Nokia devices. The memo stated “…we plan to shift select Nokia X product designs to become Lumia products running Windows.”
For the full memo, check below or head over to Microsoft’s news website.
From: Satya Nadella
To: All Employees
Date: July 17, 2014 at 5:00 a.m. PT
Subject: Starting to Evolve Our Organization and Culture
Last week in my email to you I synthesized our strategic direction as a productivity and platform company. Having a clear focus is the start of the journey, not the end. The more difficult steps are creating the organization and culture to bring our ambitions to life. Today I’ll share more on how we’re moving forward. On July 22, during our public earnings call, I’ll share further specifics on where we are focusing our innovation investments.
The first step to building the right organization for our ambitions is to realign our workforce. With this in mind, we will begin to reduce the size of our overall workforce by up to 18,000 jobs in the next year. Of that total, our work toward synergies and strategic alignment on Nokia Devices and Services is expected to account for about 12,500 jobs, comprising both professional and factory workers. We are moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months. It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas. My promise to you is that we will go through this process in the most thoughtful and transparent way possible. We will offer severance to all employees impacted by these changes, as well as job transition help in many locations, and everyone can expect to be treated with the respect they deserve for their contributions to this company.
Later today your Senior Leadership Team member will share more on what to expect in your organization. Our workforce reductions are mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment.
First, we will simplify the way we work to drive greater accountability, become more agile and move faster. As part of modernizing our engineering processes the expectations we have from each of our disciplines will change. In addition, 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. In addition, our business processes and support models will be more lean and efficient with greater trust between teams. The overall result of these changes will be more productive, impactful teams across Microsoft. These changes will affect both the Microsoft workforce and our vendor staff. Each organization is starting at different points and moving at different paces.
Second, we are working to integrate the Nokia Devices and Services teams into Microsoft. We will realize the synergies to which we committed when we announced the acquisition last September. The first-party phone portfolio will align to Microsoft’s strategic direction. 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. In addition, we plan to shift select Nokia X product designs to become Lumia products running Windows. This builds on our success in the affordable smartphone space and aligns with our focus on Windows Universal Apps.
Making these decisions to change are difficult, but necessary. I want to invite you to my monthly Q&A event tomorrow. I hope you can join, and I hope you will ask any question that’s on your mind. Thank you for your support as we start to take steps forward in evolving our organization and culture.