Microsoft has started cutting thousands of positions, mostly in its sales department, days after announcing it would shift its sales strategy to focus more on cloud services than on its traditional server and desktop businesses.
“Microsoft is implementing changes to better serve our customers and partners. Today, we are taking steps to notify some employees that their jobs are under consideration or that their positions will be eliminated,” the company said in a statement to The Washington Post. “Like all companies, we evaluate our business on a regular basis. This can result in increased investment in some places and, from time-to-time, re-deployment in others.”
The job cuts were expected after Microsoft's announcement last week. A majority of the cuts will be made to positions outside of the United States, the company said. Microsoft said that thousands of jobs would be eliminated, but it declined to confirm reports placing that figure at 3,000 positions.
There will also be a few cuts at the firm's headquarters in Redmond, Wash., the Seattle Times reported.
Cloud services have been the main focus for Microsoft chief executive Satya Nadella since he took over the company in 2014 with a mandate to modernize the firm for a mobile-first, cloud-first world. Nadella, who came up through the firm's cloud division, has narrowed Microsoft's focus and doggedly trimmed the company's workforce.
In 2014, he announced his plan to cut up to 18,000 jobs over the next year. Many cuts came from the firm's smartphone division, which Nadella sold off in 2016, two years after his predecessor purchased them for $7.2 billion. Last July, Microsoft said it would cut 2,850 positions.
Nadella's focus on the cloud has paid off for the software giant. Cloud services make up a small part of Microsoft’s revenue — the part of the firm’s business that includes Azure accounted for $6.8 billion of the $23.6 billion in revenue the company reported in its last earnings report in April. But the segment has shown tremendous growth and is seen as a key indicator of Microsoft’s overall health. The company said that the Azure division had grown its revenue by 93 percent over the same time period the previous year.
Its main rival for cloud dominance is Amazon — which is the market leader with its Amazon Web Services. (Amazon chief executive Jeffrey P. Bezos is the owner of the The Washington Post.) But Microsoft's strong growth has cheered investors, and analysts said that the firm is in a good spot to take advantage of expected growth in cloud services, and may even overtake Amazon.
“Microsoft appears best positioned to gain the most as public cloud spending triples by 2021,” Pacific Crest Securities analysts Brent Bracelin and Trevor Upton said in a note to investors earlier this month.
The cuts to the sales force are meant to streamline Azure sales, in line with the simplified sales philosophy outlined in an internal Microsoft memo leaked to press earlier this week.