18000 job cuts by Microsoft

On July 17, 2014 Microsoft CEO Satya Nadella had announced that the company would retrench up to 18,000 jobs, in what is the heaviest culling in the 39-year history of the Redmond-based company.

In 2014, Microsoft bought Nokia's struggling smartphone business for $7.2 billion. Since then, Microsoft has tried restructuring it. Therefore, of the 18,000 planned job cuts, about 12,500 would come from the Nokia business comprising both professional and factory workers.

Stephen Elop, formerly the CEO of Nokia and now head of Microsoft's devices business, told employees that the "role of mobile devices is different within larger structure of Microsoft".

The 18,000 figure announced is roughly 15 percent of the total workforce of the company, which employs 127,000 people around the world, a lot more than rivals Google and Apple.

In an e-mail to employees, Nadella positioned the job cuts as part of the evolution of Microsoft's culture as he reorients its direction toward the growth occurring in mobile devices and the cloud. Nandella also stated that "The first step to building the right organization for our ambitions is to realign our workforce. Making these decisions to change are difficult, but necessary."

Nadella says job cuts would take place mostly in Microsoft's hardware division, including its smartphone business.

It seems that Satya is aiming 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. While he expects the cost savings could add substantially to 2015 earnings, he warned that the cuts may also indicate that "Nokia operating results could be worse than we have estimated."

CEO Nadella, who only took over from Steve Ballmer in February, 2014 has put in place a cloud- and mobile-first strategy and much of the restructuring within the organisation is geared towards this diversification. The firm anticipates impairment charges of $1.1 billion to $1.6 billion over the next four quarters, which includes $750 million to $800 million for severance and related benefit costs.

Citi analyst Walter Pritchard called the move "taking a chainsaw to costs," and thinks that Nadella's actions will be "music to the market's ears. This decision led the shares of Microsoft to grow around 3% at $45.38 in the first hour of trading on July 17, 2014, and has gained 21% in 2014.

Through this decision, Satya Nadella has portrayed himself as a strong confident leader, giving silent message that after Ballmer also Microsoft is in safe hands. Nadella is an Indian and the Indians' biggest weakness is their emotion, which Nadella demonstrated he doesn't possess.

This incident has inspired many young Indian entrepreneurs not to be impassioned, rather be a hard core business man as well as a risk taker.

Ishan Modi, Grade 11- IB
Navrachana International School Management Club

 

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