Microsoft, Amazon begin cutting 28,000 jobs as tech slump deepens

Microsoft and Amazon said the painful measures were necessary to offset slowing sales and a possible recession. PHOTOS: REUTERS, AFP

SEATTLE – Microsoft and Amazon, two of the world’s biggest companies, began cutting a total of 28,000 jobs on Wednesday in a post-pandemic reckoning that has left almost no tech name unscathed.

Software giant Microsoft began notifying some of the 10,000 workers who will lose their jobs this quarter, while its Seattle-based neighbour and cloud rival Amazon started sending out e-mails to staff in the United States, Canada and Costa Rica who are among 18,000 people whose positions will be eliminated.

Both companies said the painful measures were necessary to offset slowing sales and a possible recession that has made customers more cautious. The tech industry benefited during the pandemic from a surge in demand for computers, phones, software and goods ordered online, leading to a frenetic pace of hiring.

Salesforce announced earlier this month that it would cut about 10 per cent of its workforce after acknowledging that its headcount nearly tripled in the past four years. Facebook parent Meta Platforms announced widespread job cuts last fall, and beleaguered social network Twitter has slashed about half its workforce.

Speaking before the cuts were announced, Microsoft chief executive Satya Nadella noted that the tech industry is going through a period of slowing growth and will need to adjust.

“During the pandemic, there was rapid acceleration. I think we are going to go through a phase today where there is some amount of normalisation in demand,” Mr Nadella said in an interview at the World Economic Forum in Davos, Switzerland. “We will have to do more with less – we will have to show our own productivity gains with our own technology.”

Microsoft said it still plans to hire people in strategic, competitive areas such as artificial intelligence (AI), but many other divisions were losing staff. Bloomberg reported earlier that the company plans to eliminate positions in a number of engineering divisions.

The cuts extended to Microsoft’s video game division, where some people at Bethesda Game Studios, maker of the upcoming Starfield, as well as 343 Industries, the company behind 2021’s Halo Infinite, were affected, according to sources.

“These are the kinds of hard choices we have made throughout our 47-year history to remain a consequential company in this industry that is unforgiving to anyone who does not adapt to platform shifts,” Mr Nadella said in a blog post and e-mail to staff.

Microsoft will start notifying some of the fired workers immediately, with others to come in the next several months.

US workers who get benefits will receive “above-market severance pay, continuing healthcare coverage for six months, continued vesting of stock awards for six months, career transition services, and 60 days’ notice prior to termination”, Mr Nadella said. Outside the US, Microsoft will comply with local laws.

Meanwhile, Amazon worldwide retail chief Doug Herrington said the retail giant’s cuts were part of an effort to lower costs. He said the company would “continue investing meaningfully” in growth areas including groceries, Amazon’s business-to-business sales programme, services for third-party sellers and healthcare.

The eliminations started last year and initially fell hardest on Amazon’s Devices and Services group, which builds the Alexa digital assistant and Echo smart speakers. The latest round will mostly affect the retail division and human resources.

Microsoft will take a US$1.2 billion (S$1.6 billion) charge in the second fiscal quarter related to the move, which will affect less than 5 per cent of its workforce and shave 12 US cents off of earnings per share.

The tech giant is scheduled to report results on Jan 24 and is forecast to post a second-quarter sales gain of 2 per cent, its slowest revenue increase in six years. Microsoft’s cloud computing products had fuelled a resurgence in growth in the past decade, but even that business has begun to decelerate.

Microsoft is making big bets on AI to fuel its next wave of growth. It plans to incorporate AI-based tools – some built in-house and others from its partnership with developer OpenAI – into its Azure cloud services, office worker applications and software programming tools. It is also still working to win more customers to Azure and cloud-based Office productivity programs, like the Teams conferencing software, that generate recurring revenue streams. BLOOMBERG

Join ST's Telegram channel and get the latest breaking news delivered to you.