Microsoft said Thursday that it planned to eliminate up to 18,000 jobs in the next year in a shake-up intended to help the company move more quickly in the market.
The cuts are the largest in the company’s 39-year history, representing about 14 percent of its workforce.
Of those cuts, at least 1,351 will come from the Puget Sound area, according to The Seattle Times. That’s about 3 percent of the approximately 43,000 employees Microsoft has in this area.
Most of the cuts — about 12,500 professional and factory positions — are mainly former Nokia positions but also include Microsoft positions being eliminated because of job duplication resulting from the Redmond-based company’s acquisition of Nokia, which closed in April.
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Microsoft on Thursday began eliminating 13,000 of the 18,000 jobs, with the majority of the remaining 5,000 to be notified over the next six months.
Some of the remaining 5,000 jobs will come from the Puget Sound area.
Indeed, “the emphasis on simplifying management structure and the fact that a lot of those corporate groups are here would imply that more local cuts are coming” as part of the 5,000 job holders who will be notified over the next six months, said analyst Sid Parakh of Seattle-based investment firm McAdams Wright Ragen.
The jobs being eliminated cut across multiple functions at Microsoft, though the company declined to specify which areas were hardest hit. The 1,351 local jobs that had started being eliminated Thursday also cut across multiple functions, including marketing and engineering, a company spokesman said.
The company declined to say if, or how, the cuts will affect contractors and vendors.
Microsoft will offer severance to those laid off and job transition help in many locations.
Microsoft said it would take a charge of $1.1 billion to $1.6 billion to cover severance and related costs from the layoffs over the next year.
On Thursday, Satya Nadella, the company’s chief executive, said in an email to employees announcing the job cuts that the layoffs are an effort to become more agile, a message he had given repeatedly since he took the job in February.
“Having a clear focus is the start of the journey, not the end,” he said in the email. “The more difficult steps are creating the organization and culture to bring our ambitions to life.”
He added: “The first step to building the right organization for our ambitions is to realign our work force.”
The huge job cuts in the businesses it acquired from Nokia, which is based in Finland, raise questions about Microsoft’s plans in the market for mobile devices. The acquisition, initiated by Steven Ballmer, Microsoft’s previous chief executive, greatly increased the company’s presence in the hardware business, which is outside its traditional expertise. The deal has been an unpopular one with investors and many people inside Microsoft.
Finland has staked much of its national pride on the worldwide growth of Nokia, based on the outskirts of Helsinki. And many Finns still hold a lot of affection for the company’s handsets.
That pride took a hit in recent years as the company struggled against smartphone rivals such as Apple and Samsung. It was further dented last year when Microsoft announced it would buy much of Nokia for a price that eventually amounted to about $7.5 billion.
But maybe nothing hurt quite as much as the news on Thursday that Microsoft was cutting up to 18,000 jobs. About 12,500 of those will come from Nokia groups, or from overlap at Microsoft resulting from the deal.
Microsoft said that roughly 1,100 layoffs, or 6 percent of the total job cuts, would come from Finland, primarily from a manufacturing plant in the north of the country. The company added that it would keep engineering teams in other parts of Finland. A further 1,800 job cuts are planned at a manufacturing plant in Hungary.
Since the acquisition was announced in September, Nokia employees and the wider Finnish community had greeted the pending deal with growing pessimism, according to David J. Cord, an American based in Helsinki, who wrote “The Decline and Fall of Nokia.”
Cord said that many of the best engineers from the handset business had already left the company. The exodus had left Microsoft’s new cellphone unit with many of the lesser well-trained engineers.
End of Ballmer era
Previously, the largest layoffs at the company were in 2009, when about 5,800 people were affected during the recession. Since then, Microsoft has had a few more rounds of job cuts, but the number of employees eliminated was typically in the dozens or hundreds.
In February, Nadella became the third chief of Microsoft as Ballmer stepped down, and Bill Gates, a company founder, left his role as chairman and became a technology adviser to Nadella.
Microsoft was often criticized for being unfocused during Ballmer’s tenure, and for having a swelling product line and layers of bureaucracy.
“Under the Ballmer era there were many layers of management and a plethora of expensive initiatives being funded that has thus hurt the strategic and financial position the company is in, especially in light of digesting the Nokia acquisition,” said Daniel Ives, an analyst at FBR Capital Markets, who called the cuts necessary.
Microsoft, a longtime leader in the technology industry, has struggled to find the same success in markets like mobile and Internet search that it did with personal computers. The company anticipated the rise of smartphones and tablet computers, but its products failed to capitalize on that foresight, and Apple and Samsung now dominate those markets.
Nadella signaled in a company memorandum last week that big organizational changes were coming soon. He sought to define his vision for Microsoft as a maker of productivity tools for a technology landscape shaped by cloud and mobile computing.
“We will increase the fluidity of information and ideas by taking actions to flatten the organization and develop leaner business processes,” he wrote in the memo. “Culture change means we will do things differently.”
Those statements were widely seen as foreshadowing some layoffs, and maybe even peeling off some business units. So far, Nadella has not dropped any major products or businesses.
Still, investors have welcomed his overtures. Shares have steadily risen since February and added more than 5 percent in the Past week as rumors swirled about the layoffs.
Janet I. Tu of The Seattle Times and Mark Scott of The New York Times contributed to this report.