Microsoft CEO signals change, defers talk on job cuts

Thu Jul 10, 2014 3:15pm EDT

Satya Nadella, Microsoft Corp chief executive, attends the unveil event of the new Microsoft Surface Pro 3 in New York May 20, 2014.   REUTERS/Brendan McDermid

Satya Nadella, Microsoft Corp chief executive, attends the unveil event of the new Microsoft Surface Pro 3 in New York May 20, 2014.

Credit: Reuters/Brendan McDermid

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(Reuters) - Microsoft Corp MSFT.O Chief Executive Satya Nadella deferred any comment on widely expected job cuts at the software company on Thursday, after circulating a memo to employees promising to "flatten the organization and develop leaner business processes."

Nadella said he would address detailed organizational and financial issues for the company's new financial year, which started at the beginning of this month, when Microsoft reports quarterly earnings on July 22.

"There will be many opportunities for me to talk more about our specific fiscal plans on the 22nd," Nadella said in a telephone interview.

Since absorbing the handset business of Nokia this spring, Microsoft has 127,000 employees, far more than rivals Apple Inc AAPL.O and Google Inc GOOGL.O. Wall Street is expecting Nadella to make some cuts, which would represent Microsoft's first major layoffs since 2009.

"With recent chatter on the Street about potential head count reductions at Microsoft it was important for Nadella to be visible and set an optimistic tone heading into the next few months, especially on the heels of the Nokia integration," said Daniel Ives, an analyst at FBR Capital Markets.

In a 3,105-word memo sent to employees on Friday and posted on Microsoft's website (bit.ly/1bqubHk), Nadella set out his vision for the company five months after taking over as CEO from Steve Ballmer.

Most noticeably he described Microsoft as a "productivity and platform company" focused on mobile and cloud computing, a subtle advance on Ballmer's reinvention of Microsoft as a "devices and services" company, which could signal less emphasis on manufacturing devices.

Nadella did not go into detail about specific changes he planned for Microsoft, but signaled that change was needed.

"Nothing is off the table in how we think about shifting our culture to deliver on this core strategy," Nadella wrote in the memo.

Nadella wrote that he had asked his senior leaders to "evaluate opportunities to advance their innovation processes and simplify their operations and how they work."

He did not discuss in great detail individual businesses, but did say he was committed to developing the Xbox gaming platform, pouring water on persistent talk that the unit might be spun off.

He did not address the unprofitable Bing search engine directly in the memo - which some investors have called for Microsoft to ditch - but did not indicate that he was thinking of backing away from it in an interview.

"To me, Bing is a much more core productivity technology, it's task completion in its essence," Nadella told Reuters. "That's one of the reasons why internally we get that a lot more than externally."

Microsoft shares rose slightly to $41.90 on Nasdaq, and are up 12 percent year to date on the back of renewed confidence in the company under Nadella's leadership. The stock hit a 14-year high last month, the highest since the tech-stock bubble of 2000.

(Reporting by Bill Rigby; Editing by Bernard Orr)

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Comments (5)
brotherkenny4 wrote:
I am really going to love the times when the “gamers” start turning 50. To watch what happens to the kings of lethargy and mental inactivity will be a proud day for the intentional dumbing people of the fascist corporations. The brainwash has worked, except that the patients are so moronic that they have no societal value. They exist only to provide a majority of morons in this supposed democracy that can be easily manipulated to mantain the control for the fascist masters. Well done there, “gamers”. You guys are such f’in geniuses with how well you work your “joy sticks”.

Jul 10, 2014 12:22pm EDT  --  Report as abuse
tmc wrote:
Its to bad that Microsoft is just a “me too” company. If they actually invested in the X-Box and turned it into a real home platform they might actually stay ahead of their competition for once. But no, they’ll wait until someone else does it and then they’ll claim innovation by saying “me too”.

Jul 10, 2014 1:10pm EDT  --  Report as abuse
OSU_Aero_Eng wrote:
@brotherkenny4

I happen to play video games quite frequently (most evenings for a couple hours). I also happen to be a PhD candidate in aerospace engineering. I also happen to be working an internship at one of the top research facilities in the world. I’m an author on several scientific papers and have presented my work at several conferences around the world.

Please, tell me again how I am a “king of lethargy and mental inactivity” and how I “have no societal value.”

Jul 10, 2014 1:10pm EDT  --  Report as abuse
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