Microsoft Stock Fell After It Said It Would Lay Off 10,000 People, Resulting in a Second-quarter Loss of $1.2 Billion

Microsoft Stock

Microsoft Stock (NASDAQ:MSFT)

On Wednesday, Microsoft (NASDAQ:MSFT) said that it would be laying off 10,000 employees worldwide in its fiscal second quarter and would record a $1.2 billion charge as a result.

In a letter to staff, CEO Satya Nadella said that the business would continue to recruit in some “important strategic areas” even though the number of people affected by the job losses is less than 5% of the overall workforce.

Nadella said, “it’s essential to emphasize that although we are cutting positions in some areas, we will continue to recruit in critical strategic areas.” Even though “we are removing roles in some areas,” “We are aware that this is a difficult moment for each individual who has been touched. Together with the senior leadership team, I have committed that we will go through this process in the kindest and open-minded manner that is humanly feasible.”

Microsoft (NASDAQ:MSFT) also said it will begin “lease consolidation as we establish increased density throughout our workplaces.”

Microsoft (NASDAQ:MSFT), headquartered in Redmond, Washington, said that the $1.2 billion charge would have a negative effect on earnings per share for the second quarter by 12 cents.

In the early trade on Wednesday, Microsoft stock dropped by more than 1%.

Microsoft (NASDAQ:MSFT) was said to be planning massive layoffs across the board on Tuesday, which would have been much more severe than prior rounds of layoffs.

Analyst Dan Ives from Wedbush Securities said that the recent layoffs at Microsoft (NASDAQ:MSFT) are one more story for the clock striking “midnight” as the pace of development in the technology industry slows down after a decade of robust expansion.

Ives, who has an outperform rating on Microsoft stock, told clients that “this is a rip the band-aid off moment to preserve margins and cut costs in a softer macro.” This is a strategy that the Street will continue to applaud as management teams navigate this Category 5 near-term economic storm. “This is a rip the band-aid-off moment to preserve margins and cut costs in a softer macro,” Ives said.

On January 24, Microsoft is expected to release the financial results for the company’s fiscal second quarter.

John DiFucci, an analyst at Guggenheim, recently reduced his recommendation on MSFT stock to sell, citing the possibility of a dismal prediction as the reason for his decision.

Featured Image: Pexels @ Salvatore De Lellis

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