Thousands axed as Nadella reshapes Microsoft's future

Microsoft has revealed plans to cut up to 18,000 jobs over the next year, as part of CEO Satya Nadella’s bold restructuring plan across the company.

Designed to “simplify” its functions as an organisation, the move is part of wider plans to align with the recently acquired Nokia Devices and Services business.

The biggest jobs cull since 2009, Microsoft says of the total, about 12,500 professional and factory positions will be eliminated due to the company’s integration with Nokia, which was acquired on April 25.

“Making these decisions to change are difficult, but necessary,” wrote Nadella, in a memo to staff today.

Last week, Nadella laid out his strategic direction as a productivity and platform company to staff, with the new man at the helm now putting such plans into action.

“Having a clear focus is the start of the journey, not the end,” he added.

“The more difficult steps are creating the organisation and culture to bring our ambitions to life.”

Expected to be substantially complete by the end of the year, and fully completed by June 30, 2015, the company expects to incur pre-tax charges of US$1.1 billion to $1.6 billion over the next four quarters, including $750 million to $800 million for severance and related benefit costs, and $350 million to $800 million of asset-related charges.

“It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas,” Nadella added.

“My promise to you is that we will go through this process in the most thoughtful and transparent way possible.

“We will offer severance to all employees impacted by these changes, as well as job transition help in many locations, and everyone can expect to be treated with the respect they deserve for their contributions to this company.”

Phase one…

Nadella told staff Senior Leadership Team members will share more on what to expect in the company, with the workforce reductions mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment.

“First, we will simplify the way we work to drive greater accountability, become more agile and move faster,” he wrote.

“As part of modernising our engineering processes the expectations we have from each of our disciplines will change.

“In addition, we plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making.

“This includes flattening organisations and increasing the span of control of people managers.

“The overall result of these changes will be more productive, impactful teams across Microsoft.”

Phase two…

Secondly, Nadella told staff the tech giant is working to integrate the Nokia Devices and Services teams into Microsoft.

“We will realise the synergies to which we committed when we announced the acquisition last September,” he added.

“The first-party phone portfolio will align to Microsoft’s strategic direction.

“To win in the higher price tiers, we will focus on breakthrough innovation that expresses and enlivens Microsoft’s digital work and digital life experiences.”

In addition, Microsoft plans to shift select Nokia X product designs to become Lumia products running Windows.

“This builds on our success in the affordable smartphone space and aligns with our focus on Windows Universal Apps,” he added.

Thanking staff for their support as he closed, Nadella signed off by reminding employees of the bigger picture - the need to take the necessary steps to evolve as an organisation and culture.