Microsoft planning huge job cuts to cope with Nokia unit integration

By Bloomberg Updated: 2014-07-16 07:09

A shadow of a man using his mobile phone is cast near Microsoft logo at the 2014 Computex exhibition in Taipei in this June 4, 2014 file photo.[Photo/Agencies]

Microsoft Corp is planning its biggest round of job cuts in five years, as the software maker looks to slim down and integrate Nokia Oyj's handset unit, people with knowledge of the company's plans said.

The reductions - which may be unveiled as soon as this week - will probably be in areas such as Nokia and divisions of Microsoft that overlap with that business, as well as marketing and engineering, said the people, who asked not to be identified because the plans are not public.

The restructuring may end up being the biggest in Microsoft history, topping the 5,800 jobs cut in 2009. Some details are still being worked out, two of the people said.

The announcement would come one week after Chief Executive Officer 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, Nadella, who took over from Steve Ballmer in February, said he would provide more specifics on implementation later this month.

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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 year - it has undertaken a companywide restructuring affecting thousands of workers only once before, in 2009 at the start of the recession.

During that year, the company cut 5,800 jobs, or about 5 percent of its workforce at the time.

Peter Wootton, a spokesman for Redmond, Washington-based Microsoft, declined to comment.

Some of the cuts will be in marketing departments for businesses such as the global Xbox team, the people said. That team is based in Reading, England.

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

When Microsoft agreed to buy Nokia's mobile-phone business in September, the software maker pledged $600 million in annual cost savings in the 18 months after the deal closed. Meeting that commitment will probably involve job cuts in areas where the two companies overlap, the people said. Other cuts may result from changes Nadella is making to the engineering organization, people with knowledge of the matter said last week.

Engineering teams traditionally have been split between program 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.

Nadella declined to say whether the changes will result in job cuts, saying he would provide more details when Microsoft reports fiscal fourth-quarter earnings on next Tuesday. Some of the cuts will be among software testers, said one of the people.

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