Tech Industry

Microsoft layoffs coming soon, analyst says

Announcement of layoffs ranging between 5 percent and 10 percent expected this month when the company reports its fiscal quarter.

Microsoft CEO Satya Nadella Getty Images

When Microsoft releases earnings on July 22, the company likely will announce layoffs that range between 5 percent and 10 percent of employee head count, according to Nomura Securities analyst Rick Sherlund.

Microsoft hasn't talked in detail about future staff reductions, but the rumor has been around for weeks. Separately, CEO Satya Nadella appeared to tease at the news -- and more -- when he published a wide-ranging 3,100-word post on Thursday with a clear, between-the-lines message: Big changes are on the way.

The expected staff reductions are especially likely to impact the roughly 25,000 employees who Microsoft added to the payroll when it closed its deal to buy Nokia's phone business for $7.2 billion in April.

In the memo he sent to Microsoft employees, Nadella kept the spotlight on what essentially was a call to arms to restore innovation at the company and speed up the decision-making process. And in a follow-up interview with CNET, he expressed satisfaction with the way that Microsoft employees have received his message to date. But as he approaches the six-month point in his tenure as CEO, Nadella's no longer the "new" boss at Microsoft. This is now his company, and he intends to make that clear -- starting soon.

"We viewed his letter yesterday to employees as putting everyone on notice that he wants to make organizational changes to reduce layers of management, fix accountability, stimulate innovation and implement organizational changes," wrote Sherlund, a veteran Microsoft watcher.

He estimates that Microsoft could eliminate about $1 billion in costs through a 25 percent reduction in the Nokia business.

In his missive, Nadella promised a more nimble Microsoft and said he intended to "streamline the engineering process and reduce the amount of time and energy it takes to get things done. You can expect to have fewer processes but more focused and measurable outcomes. You will see fewer people get involved in decisions and more emphasis on accountability."

Microsoft declined to comment on Sherlund's report.

Update, 1:30 p.m. PT: Adds Microsoft declining to comment.