Nadella told the infamous Klaus Schwab that the economy was akin to fighting gravity:
“No one can defy gravity and gravity here is inflation-adjusted economic growth,” the CEO said.
The CEO also remarked that the company must invest in "long-term opportunity" amid an ongoing global recession and advancements in artificial intelligence.
"The next major wave of computing is being born with advances in AI, as we’re turning the world’s most advanced models into a new computing platform," Nadella said in a Microsoft blog.
"This is the context in which we as a company must strive to deliver results on an ongoing basis, while investing in our long-term opportunity," he added.
Nadella described over $1 billion in costs in the the second quarter of 2023, likening the job cuts to "hard choices" the company has had to make over its near 50 year existence.
"We are taking a $1.2 billion charge in Q2 related to severance costs, changes to our hardware portfolio, and the cost of lease consolidation as we create higher density across our workspaces," he noted.
With approximately 220,000 full-time employees as of June 2022, and 122,000 of those jobs in the United States, the cuts amount to approximately 5% of the staff at Microsoft. However, the company says it will continue to hire in "strategic areas."
"These decisions are difficult, but necessary," the executive continued before outlining the benefit packages for outgoing employees.
"U.S.-benefit-eligible employees will receive a variety of benefits, including above-market severance pay, continuing healthcare coverage for six months, continued vesting of stock awards for six months, career transition services, and 60 days’ notice prior to termination, regardless of whether such notice is legally required," Nadella described.
Many tech companies have seen job cuts related to poor economic performance in the U.S.; Amazon totaled 18,000 cuts in late 2022 to early 2023.
Meta also cut 11,000 jobs in November 2022.
According to Yahoo Finance, Microsoft stock dropped by nearly 25% in 2022.
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