Amazon, Microsoft to Exterminate 28,000 Jobs as the Tech Slump Widens

(Bloomberg) — Microsoft Corp. and Amazon.com Inc., 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.

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Software giant Microsoft began notifying 10,000 workers who will lose their jobs in this quarter. Meanwhile, Amazon, a Seattle-based cloud rival, started sending emails to people in the US and Canada.

Both companies claimed that the hard work was necessary to offset slowing business and a possible economic recession, which have made customers more skeptical. The surge in online orders for phones, computers, and software has led to rapid hiring. Salesforce Inc. made an announcement earlier this month about a 10% reduction in its workforce following recognition that its workforce had nearly tripled in four years. Meta Platforms Inc., the parent of Facebook, announced extensive job cuts last autumn. Twitter Inc. is in dire straits and has cut about half of its workforce.

Satya Nadella, Chief Executive Officer, stated that the tech industry is experiencing slow growth and would need to adapt.

“During the pandemic there was rapid acceleration. I think we’re going to go through a phase today where there is some amount of normalization in demand,” 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 claimed it will continue to hire in competitive and strategic areas such as artificial intelligence. However, other divisions are losing staff, including the HoloLens goggles and headsets business. According to people familiar, Congress has declined funding the headset for the US Army. Bloomberg reported earlier that the company intends to reduce positions in a variety 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 people familiar with the matter. According to a state employment filing, Microsoft is eliminating 878 jobs in Washington.

“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 doesn’t adapt to platform shifts,” Nadella said in a blog post and email to staff.

Meanwhile, Amazon’s worldwide retail chief Doug Herrington said the retail giant’s cuts were were part of an effort to lower costs “so we can continue investing in the wide selection, low prices and fast shipping that our customers love.” He said the company would “continue investing meaningfully” in growth areas including groceries, Amazon’s business-to-business sales program, 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. This round will mainly affect the retail division as well as human resources.

Check out a list of technology companies that are planning layoffs

Microsoft will take a $1.2Billion charge in the second quarter to cover the move. The company stated in a corporate filing that the move will have a minimal impact on 5% of its workforce. It will also reduce earnings per share 12 cents. Redmond, Washington-based Microsoft said the charge will go to severance costs, “changes to our hardware portfolio” and the cost of consolidating real estate leases as the company creates higher density across its workspaces.

Microsoft will release its quarterly results on Jan. 24, and it is expected to record a sales gain of 2.2% for its second quarter. This is the slowest revenue increase in six decades. Microsoft’s cloud-computing products have fueled a resurgence in growth in the past decade, but even that business has begun to decelerate.

Analysts predicted that Microsoft would feel the pinch in 2011, despite having weathered previous slowdowns with no job cuts. Guggenheim Securities gave the company a sell rating of neutral on Tuesday. This was the first bearish analyst ratings for the software company in over three decades.

Guggenheim analyst John DiFucci cited Microsoft’s exposure to small and mid-sized businesses as a risk in an economic slowdown, along with growth concerns for the company’s Windows operating-system and Azure cloud-computing businesses. UBS cut its stock to neutral in March, citing concerns about the cloud computing division.

Microsoft is investing heavily in artificial intelligence to help fuel its next wave. 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’s also still working to win more customers to Azure and cloud-based Office productivity programs, like Teams conferencing software, which generate recurring revenue streams.

Microsoft will immediately notify the affected workers, with more to follow over the next few months. US workers that 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,” Nadella said. Microsoft will adhere to local laws outside the USA.

(Updates with reductions in the gaming division

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