Microsoft (NASDAQ:MSFT) has begun laying off thousands of employees, mostly in its sales department. The eliminations will be some of the most significant to the sales force in years. The layoffs also expected to impact local marketing efforts in various countries.
The company said in a statement, “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 a few cuts will occur at the firm’s headquarters in Redmond, Wash., but most of the cuts will be made to positions outside of the United States.
Microsoft declined to confirm reports placing the number of positions being eliminated at 3,000. Even then, the job cuts would amount to less than 10 percent of the company’s total sales force. Microsoft has 71,000 employees in the U.S. and 121,000 employees around the globe.
The job cuts were expected after Microsoft’s announcement last week. The layoffs come just days after the company announced it was shifting its sales strategy to focus more on cloud services. The segment has shown tremendous growth, growing its revenue by 93 percent over the same time period the previous year.
Microsoft said its goal isn’t to cut costs, but to use employees who are more knowledgeable about specific verticals to sell bigger packages. It’s now more important to convince customers to sign up for cloud services hosted in Microsoft’s datacenters. A simplified sales philosophy was outlined in an internal Microsoft memo that was leaked to press earlier this week.
Cloud services have been the main focus for Microsoft chief executive Satya Nadella. Nadella came up through the firm’s cloud division. Cloud services make up a small part of Microsoft’s revenue, accounting for $6.8 billion of the $23.6 billion in revenue reported in the firm’s last earnings report. Microsoft’s commercial cloud run rate hit $15.2 billion during the March quarter, up from $14 billion in the previous quarter.
In 2014, Nadella announced a plan to cut up to 18,000 jobs over the next year. Many of those targeted cuts came from Microsoft’s smartphone division, which Nadella sold off in 2016. Last July, Microsoft said it would cut 2,850 positions. For the entirety of fiscal year 2016, Microsoft cut 7,400 employees. Microsoft stock was down slightly following news of the layoffs.