Microsoft set to announce biggest round of job cuts

SEATTLE — Microsoft is planning its biggest round of job cuts in five years, as the software maker looks to slim down and integrate Nokia’s handset unit, sources have said.

The reductions — which may be unveiled this week — will probably affect Nokia and divisions of Microsoft that overlap with that business, as well as marketing and engineering, said the sources.

The restructuring may end up being the biggest in Microsoft history, topping the 5,800 jobs cut in 2009, although some details are still being worked out, the sources added.

The announcement would come a week after CEO Satya Nadella issued his first company mission statement, calling for greater emphasis on mobile devices, cloud-computing and productivity software.

In the July 10 memo, which also called for Microsoft to become more focused and efficient, Mr Nadella, who took over from Mr Steve Ballmer in February, said he would provide more specifics on the implementation later this month.

The company had 127,104 employees as of June 5, after adding about 30,000 in its acquisition of Nokia’s handset unit.

While Microsoft has undergone smaller, intermittent job cuts in individual businesses — for example trimming a few hundred positions in advertising sales and marketing in 2012 and some marketing jobs across the company earlier that same year — the company has only undertaken a company-wide restructuring impacting thousands of workers once before, in 2009 at the start of the recession.

Over the course of that year, the company cut 5,800 jobs, or about five per cent of its workforce at the time.

A spokesman for Microsoft declined to comment.

Some of the job cuts will be in marketing departments for businesses such as the global Xbox team, the sources added.

When Microsoft agreed to acquire Nokia’s mobile-phone business in September, the software maker pledged US$600 million (S$745 million) in annual cost savings in the 18 months after the deal closes.

Meeting that commitment will probably involve job cuts in areas where the two companies overlap, said the sources. Other job cuts may result from changes Mr Nadella is making to the engineering organisation.

Engineering teams have traditionally been split between programme managers, developers and testers.

Yet with new cloud methods of building software, it often makes sense to have the developers test and fix bugs instead of a separate team of testers, Nadella said in an interview last week after unveiling his memo.

Mr Nadella declined to say in the interview whether the changes will result in job cuts and said he would provide more details on the implications of his memo when Microsoft reports fiscal fourth-quarter earnings on July 22.

Microsoft is the latest technology company seeking to reduce costs by trimming jobs. Hewlett-Packard in May announced more cuts after an 11th-straight quarter of declining sales. CEO Meg Whitman has said she will eliminate as many as 16,000 jobs on top of 34,000 already cut.

Meanwhile, tech industry attention will also be squarely focused on Microsoft’s earnings next week, which are expected to show signs of improvement: A Bloomberg survey of analysts showed that the software giant may report a 10 per cent increase in revenue after stagnating in the previous period, helped by a pick-up in demand in the personal-computer industry as businesses increased purchases of machines to replace outdated models.

Research firm IDC said there was a 6.9 per cent increase in PC unit sales in the United States in the last quarter. BLOOMBERG