Microsoft to cut thousands of engineering jobs, reports claim

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Microsoft Corp. could become the latest technology giant to announce a significant number of layoffs, according to a report from Bloomberg today.

The report cites a “person familiar with the matter” as saying that the fresh round of job cuts would be “significantly larger” than earlier layoffs announced by Microsoft over the last year. If true, it would mean Microsoft joins the ranks of a growing number of large tech firms that are cutting jobs ahead of a possible global recession and reduced demand for their services this year.

Bloomberg’s source, who asked not to be identified, said the number of job cuts at Microsoft is not clear, but would likely affect people working in its engineering divisions. The report follows a claim by Sky News that Microsoft is planning to lay off about 11,000 employees, which would amount to roughly 5% of its workforce.

Previously, Microsoft announced a small number of job cuts in October and July that affected fewer than 1% of its more than 200,000 employees. The company has also notably paused hiring in many of its business units and has eliminated most of its job vacancies. That said, while the likes of Amazon.com Inc., Meta Platforms Inc. and Salesforce Inc. have all reacted to a slowing economy by cutting large numbers of jobs, Microsoft has been more cautious about scaling back its workforce.

In recent weeks, a growing number of tech firms have wielded the ax, with Amazon slashing 18,000 jobs, or around 6% of its workforce, Salesforce cutting around 8,000 jobs and Meta, the parent company of Facebook, saying it would get rid of approximately 11,000 of its workers.

Analysts say the industry has been forced to respond amid signs of a slowing global economy this year, with many tech firms perhaps feeling they are now overstaffed following major hiring sprees during the COVID-19 pandemic. “There’s a general sense that many of the biggest tech vendors expanded rapidly during the past few years of plenty, leaving them bloated and overstaffed,” said Charles King of Pund-IT Inc. “With economies contracting in many global regions, layoffs are the quickest way to scale back business and remain somewhat profitable.”

What is surprising, the analyst said, is that the reports suggest Microsoft is looking to layoff staff from its engineering divisions, as these positions are generally seen as being more secure. “Marketing and recruitment are often the first groups to be downsized, while engineers and other critical product development teams tend to feel less pain, unless the solutions they’re working on are lagging or producing less-than-hoped-for results,” King explained.

Holger Mueller of Constellation Research Inc. said the key questions are where, and how large the cuts will really be. “If the cuts are significant like the reports say, it may result in a different Microsoft than the one we are used to seeing,” he said. “It’s possible the cuts could also result in Microsoft ditching some of its ambitions and perhaps even some entire divisions.”

As for Microsoft’s immediate prospects, analysts are currently forecasting it to post a revenue gain of about 2% in its fiscal third-quarter results, which will be announced on Jan. 24. That would be Microsoft’s slowest sales growth since fiscal 2017. Ever since then, the company has enjoyed strong growth thanks to rising demand for its Azure cloud computing services. However, even Azure’s growth has begun to slow.

A number of big tech firms continue to refrain from cutting any significant numbers of jobs, notably Google LLC and Apple Inc.

Photo: Microsoft