Microsoft Announces Massive Job Cuts

Microsoft has announced plans to cut 18,000 jobs, or roughly 14 per cent of its total workforce, by June 2015. The bulk of the cuts will be in its phone unit Nokia, followed by firm's sales, marketing, and engineering divisions. The question is: will these job cuts help or hinder the company's growth?

Microsoft chief executive officer Satya Nadella says those affected by the cuts will be notified in the next six months. Microsoft is reportedly planning to offer affected employees generous severance and job transition packages worth an estimated $800 million.

"The first step to building the right organization for our ambitions is to realign our workforce," Nadella recently told Microsoft employees. "My promise to you is that we will go through this process in the most thoughtful and transparent way possible." (Source: usatoday.com)

A "Step in the Right Direction," Analyst Says

It's the most jobs Microsoft has cut at one time in the company's entire history. Experts believe the layoffs are part of Nadella's attempt to re-tool Microsoft, which is focusing more and more on two sectors of the tech market: mobile and the cloud. Earlier this year, Microsoft launched Microsoft Office for the iPad, and shortly after increased free cloud storage limit to OneDrive in hopes of luring new users toward their cloud infrastructure.

According to FBR Capital Markets & Co. analyst Daniel Ives, this might just be the right move for the Redmond, Washington-based firm. "Microsoft needs to be a leaner tech giant over the coming years in order to strike the right balance of growth and profitability around its cloud and mobile endeavors," Ives said. "We view this as another step in the right direction ... Nadella is not wearing rose-colored glasses." (Source: bloomberg.com)

It appears that investors agree with Ives, as Microsoft shares shot up almost three per cent to $45.30 yesterday morning. In fact, Microsoft shares are up 18 per cent so far this year.

Microsoft Not Alone in Making Big Cuts to Tech Market

Microsoft is not the only major tech company to announce layoffs in recent months. Hewlett-Packard (HP) announced its plans to cut 16,000 jobs this past may. The company is also making the push towards mobile computing and cloud-based services.

Earlier this year, IBM revealed a massive $1 billion restructuring plan, and is also planning to lay off a substantial part of its workforce.

What's Your Opinion?

Do you think the layoffs will help Microsoft become a stronger company capable of offering better products in the coming years? Are you happy or upset with Nadella's plans to focus on mobile computing and cloud-based services? Or should this be considered the beginning of the end for Microsoft and other, similar tech companies (like HP)?