Microsoft Corporation (MSFT) Lays off 18,000 Employees in a Move that Analysts Feel is Right.

Microsoft Corporation (NASDAQ:MSFT) today confirmed the largest layoff in the company’s history. Over the course of the next one year, the company would be laying off 18,000 people of its 125,000 workforce. In its statement Microsoft (NASDAQ:MSFT) said that 12,500 of these jobs would be from the Nokia group, which it had acquired in a $7 billion deal. The company said that it would be cost the company $1.1 billion to $1.6 billion in covering the severance and related costs of the layoff, over the next year.

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Speaking to CNBC, Kirk Materne, a technology analyst with Evercore Partners said:

“that’s clearly much higher than what we were expecting. We were like most people thinking about 5,000 to 6,000. This is a pretty significant cut, and i think it tells you that Satya Nadella is trying to put his own stamp on the company and he’s not going to let Nokia become a quagmire in terms of dragging down the potential efficiencies in the business and driving some margin expansion.”

When asked about whether in retrospect the Microsoft Corporation (NASDAQ:MSFT) and Nokia deal makes sense, Mr. Materne said that the deal still makes sense in terms of Microsoft’s objects in the platform and productivity strategy that the company has put. Agreeing with the opinion of other analysts on the street, Mr. Materne also said that even though there is a chance of talent getting lost through this layoff like any other layoff, the company was running ‘bloated’ and the investors had seen this coming.

Talking about the 50% surge in Microsoft Corporation (NASDAQ:MSFT) stock in the last one year, Mr. Materne said:

“I think with Microsoft you’ve had two things. I think one: people have finally recognized that most of the earnings power from Microsoft is coming from the corporate businesses. It’s not just about the device side and the pc side. So that recognition’s been positive and having a change agent at the head of the organization has obviously been important.”

He also believes that after 10 years of going nowhere, Satya Nadella’s decision to drive Microsoft Corporation (NASDAQ:MSFT) in the direction where secular trends are going, has made people sit back and take notice.

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