In the latest round of job cuts to hit the tech industry, Microsoft will get rid of 10,000 jobs.
It will affect up to 5% of its global workforce and cost the company $1.2 billion (£972 million) in costs for layoffs and reorganisation.
Satya Nadella, the CEO of Microsoft, said that even though customers spent more money during Covid, more people now choose to “exercise caution.”
He said that the company would keep hiring in key areas.
In a memo to staff, Mr. Nadella broke the news that many parts of the world were in or about to go into recession. He also said that “at the same time, the next big wave of computing is being born, thanks to advances in AI.”
The Financial Times says that Microsoft is thinking about investing billions of dollars in OpenAI, the company that makes ChatGPT (Generative Pre-trained Transformer).
The next round of layoffs from big tech didn’t take long to come.
Microsoft is the latest company to do this, but it won’t be the last. The giants are trying to tighten their belts after the boom time of the pandemic, when people were stuck at home and wanted to spend their money on digital entertainment and devices because they couldn’t leave.
That doesn’t mean the industry is stagnant, though. Reports say Microsoft is thinking about investing $10 billion in the company behind ChatGPT, the chatbot that has captivated the millions of people who have tried it and is seen by some experts as the future of search.
Microsoft’s Bing search engine has taught it that you only need a small part of that market to make a lot of money.
And don’t forget that it wants to buy the big game company Activision Blizzard, which would give it a whole new set of high-profile games to sell.
But that’s not much comfort for the thousands of workers who could lose their jobs at the start of 2023.
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Hundreds of tech companies, including some of the biggest ones like Amazon and Meta, the company that owns Instagram, have laid off workers in the past few weeks.
Amazon said at the beginning of this year that it was going to cut more than 18,000 jobs because of “the uncertain economy” and the fact that it had hired a lot of people quickly during the pandemic.
Meta said in November that it would lay off 13% of its employees, or 11,000 people.
But Jason Wong, a tech industry analyst at the consulting firm Gartner, warned against assuming that layoffs at “enterprise” companies like Microsoft and Amazon were caused by the same things as layoffs at big social media companies, because some of those companies had more problems because of “where they want to take the business.”
For Twitter, this meant switching to “a model away from pure advertising,” and for Facebook, he pointed to the company’s interest in the metaverse.
During the pandemic, more people worked from home and did other things online, which helped Microsoft’s business grow as well.
Between June 2021 and June 2022, its number of full-time workers grew by about 40,000. In June 2022, it said it had about 221,000 full-time workers, including 99,000 who worked outside the US.
As business slowed down last year, the company laid off a number of people.
By the end of the third quarter of 2023, the last 10,000 should be finished.
The memo said that some staff members would be told right away.
Mr. Nadella said he would treat people with respect and dignity and be honest.
Layoffs.fyi, a site that keeps track of layoffs, says that more than 1,000 tech companies let go of 154,336 workers in 2022 alone.
The site says that so far this year, 26,061 people who work in the tech sector have already lost their jobs.
Experts say there is still a need for people with the right skills, especially engineers with experience in artificial intelligence (AI) and data science.
But Kevin Poulter, an employment lawyer at the law firm Freeths, says, “Employees who lose their jobs because of these cuts may find it hard to find other work, given that similar cuts have already been announced at Meta, Amazon, Salesforce, and in the tech sector as a whole.”