Microsoft’s new CEO Satya Nadella said on Thursday that he will be slashing about 14% of Microsoft’s workforce, or approximately 18,000 people over the next year in an effort to transform the giant company into a cloud-computing, mobile friendly software company.
The massive cuts are the largest in the company’s 39-year history, exceeding the more than 5,000 positions removed in 2009. “We will simplify the way we work to drive greater accountability, become more agile and move faster,” Nadella said in a statement to Microsoft employees.
“We plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making.”
Nadella is only the third CEO in Microsoft’s history after Steve Ballmer and Bill Gates who favored cutting down Microsoft’s management to large-scale layoffs. He added that “The company will start with 13,000 cuts today and the majority of eliminated workers will be notified in the next six months,”.
The majority of the cuts will come from newly acquired phone maker, Nokia. About 12,500 jobs that will be eliminated will come from the Nokia groups, such as the closing of the Hungary factory. This is about half the number of employees that joined Microsoft after Nokia’s acquisition.
Microsoft acquired Nokia in April for $7.2 billion.
An analyst at FBR Capital Markets said that Wall Street favored the layoffs stating that “While the cuts will be painful for employees, they were necessary…Nadella is clearing the decks for the new fiscal year. He is cleaning up part of the mess that Ballmer left.”
Microsoft stocks reached $45.40 today in early trading, their highest since the 2000.
Nadella mentioned that Microsoft would take a charge of approximately $1.1 billion to $1.6 billion to offer severance packages to all employees impacted by the layoffs.
In related news, Microsoft said it would cease making Nokia phones with Android operating system, switching it to Microsoft’s Windows Phone software.