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Layoffs raise questions about Nadella's commitment to Nokia deal

Juan Carlos Perez | July 18, 2014
Maybe the new CEO doesn't fully share his predecessor's vision of Microsoft as a maker of smartphones.

Gartner's Adrian noted that "there is substantial investment going on at the same time" that these layoffs are being carried out. "This is reshaping, not cutting," he said.

Although Nadella tried to put a positive spin on the staff reduction, saying it's necessary to make Microsoft leaner, faster, more efficient and agile, the fact remains that he just authorized the largest round of layoffs in its history. It will be tricky to minimize the inevitable aftershocks affecting employee morale and triggering concerns about the company among some outsiders, such as partners, customers and investors.

"You want to make sure when you make cuts in this magnitude, that they are done in a way that really delivers extra benefits to the business rather than just lowering overall headcount," said Charles King, chief analyst at Pund-IT.

"You want to cut the fat but not cut into the muscle or bone. In an organization with 100,000 employees, there is bound to be fat, but depending on how aggressive a strategy like this is, sometimes you can get rid of the good people along with those who aren't so good," King added.

Nadella will have to explain the layoffs not only to shareholders but to employees as well and, King added, it's counterproductive if staffers "remain on edge, fearing that the ax may fall on them any minute."

(Joab Jackson in New York, Chris Kanaracus in Boston and Peter Sayer in Paris contributed to this report.)

 

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