Earlier this month, UBS cut the stock to neutral, pointing to concerns about the cloud-computing division.
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Guggenheim analyst John DiFucci cited Microsoft’s exposure to small and mid-sized businesses as a risk in an economic slowdown, along with growth concerns for the company’s Windows operating-system and Azure cloud-computing businesses.
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On Tuesday the company was downgraded to sell from neutral at Guggenheim Securities, the first bearish analyst rating on the software maker in more than three years. Microsoft’s cloud-computing products have fueled a resurgence in growth in the past decade, but even that business has begun to decelerate.Īnalysts had been predicting that Microsoft, which has weathered past slowdowns without massive job cuts, would feel the pinch this year. and is forecast to post a second-quarter sales gain of 2%, its slowest revenue increase in six years. Microsoft is scheduled to report results on Jan. Redmond, Washington-based Microsoft said the charge will go to severance costs, “changes to our hardware portfolio” and the cost of consolidating real estate leases as the company creates higher density across its workspaces.
Microsoft will take a $1.2 billion charge in the second fiscal quarter related to the move, which will affect less than 5% of its workforce and shave 12 cents off of earnings per share, the company said in a corporate filing. The latest round will mostly affect the retail division and human resources. The eliminations started last year and initially fell hardest on Amazon’s Devices and Services group, which builds the Alexa digital assistant and Echo smart speakers. Meanwhile, Amazon’s worldwide retail chief Doug Herrington said the retail giant’s cuts were were part of an effort to lower costs “so we can continue investing in the wide selection, low prices and fast shipping that our customers love.” He said the company would “continue investing meaningfully” in growth areas including groceries, Amazon’s business-to-business sales program, services for third-party sellers and healthcare. “These are the kinds of hard choices we have made throughout our 47-year history to remain a consequential company in this industry that is unforgiving to anyone who doesn’t adapt to platform shifts,” Nadella said in a blog post and email to staff. Microsoft is eliminating 878 positions in Washington, according to a state employment filing. The cuts extended to Microsoft’s video-game division, where some people at Bethesda Game Studios, maker of the upcoming Starfield, as well as 343 Industries, the company behind 2021’s Halo Infinite, were affected, according to people familiar with the matter. Bloomberg reported earlier that the company plans to eliminate positions in a number of engineering divisions. But many other divisions were losing staff, including its HoloLens goggles business which is scaling back work on a headset for the US Army that Congress declined to fund this year, according to people familiar with the matter. Microsoft said it still plans to hire people in strategic, competitive areas, such as artificial intelligence.
“We will have to do more with less - we will have to show our own productivity gains with our own technology.”
I think we’re going to go through a phase today where there is some amount of normalization in demand,” Nadella said in an interview at the World Economic Forum in Davos, Switzerland. “During the pandemic there was rapid acceleration. Speaking before the cuts were announced, Chief Executive Officer Satya Nadella noted the tech industry is going through a period of slowing growth and will need to adjust. announced widespread job cuts last fall, and beleaguered social network Twitter Inc. announced earlier this month that it would cut about 10% of its workforce after acknowledging that its workforce nearly tripled in the past four years. The tech industry benefitted during the pandemic from a surge in demand for computers, phones, software and goods ordered online, leading to a frenetic pace of hiring. The software giant began notifying some of the 10,000 workers that will lose their jobs this quarter, while its Seattle-based neighbor and cloud rival Amazon started sending out emails to people in the US, Canada and Costa Rica who are among 18,000 people whose positions will be eliminated.īoth companies said the painful measures were necessary to offset slowing sales and a possible recession that has made customers more cautious.
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