The Impact of Microsoft Corporation (MSFT)’s 18,000 Job Cuts

Microsoft Corporation (NASDAQ:MSFT) announcement that it will eliminate up to 18,000 jobs has caused shockwaves in the company especially so, on Nokia where two-thirds of the cuts are to be carried out. The restructuring is set to affect 14% of the company’s workforce including 12,500 jobs at Nokia. The cuts will affect 5% of Microsoft pre-Nokia workforce which according to Nomura Securities managing director, Rick Sherlund, in an interview on CNBC will substantially trim Nokia operational costs.

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“It is a pretty bold move and i think what it does, it signals that Microsoft is not going to get in a slippery slope with Nokia. They are actually going to trim the Nokia cost structure very substantially,” said Sherlund.

Microsoft Corporation (NASDAQ:MSFT) investors were worried that acquisition of Nokia Corporation (ADR) (NYSE:NOK) would affect the company’s earnings on the fact that it was on a slippery slope in terms of its earnings amidst increased competition on the smartphone business. The latest job cuts according to Sherlund will considerably reduce the operation cost in the hardware space.

The major concern going forward is whether Microsoft Corporation (NASDAQ:MSFT) will be able to gain relevance in the cloud space as it has done in the past on the enterprise segment. The company’s CEO has emphasized that the company is now more than ever focused on the cloud rather than tradition hardware business that has felt the full force of increased competition.

The latest job cuts affect half of Nokia Corporation (ADR) (NYSE:NOK) workforce highlighting the fact that Microsoft is trying to make a statement on its hardware business. The huge cuts do not come as a surprise to CNBC’s Jon Fortt especially on the Nokia Corporation (ADR) (NYSE:NOK) side considering it has performed dismally on the smartphone space. Mr. Frott also believes that Nadella has taken advantage of the latest cuts to reduce the workforce at Microsoft.

“I was saying a couple of days ago that it would be interesting to see whether Satya Nadella takes advantage of this moment of cutbacks to not only affect Nokia but the rest of Microsoft Corporation (NASDAQ:MSFT)  and put his stamp on that,” said Mr. Fortt

The latest cuts come as Microsoft Corporation (NASDAQ:MSFT) CEO emphasized on the need to restructure the way company performs in terms of team work as well as reducing on middle management.

Disclosure: none

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