Microsoft to cut 18,000 jobs over the next year

Software giant Microsoft plans to lay off up to 18,000 workers around the world over the next year, mostly related to the company's purchase of handset maker Nokia last year.

The company made the announcement in a press release early Thursday, saying that of the total, about 12,500 professional and factory positions will be eliminated through synergies.

The cuts will represent about15 per cent of the company's global workforce, inthe largest single layoff announcement in Microsoft's history.

The company declined to offer any other specifics when asked by CBC News how many Canadian employees might be affected. But Microsoft has 11 offices and 1,200 across Canada, with headquarters in Mississauga.

Most of the cuts will happen by the end of this calendar year, but all will be finalized byJune 2015.

Cuts were expected

The company expects to pay out$750 million to $800 million for severance and related benefit costs linked to the layoffs.

Investors had been expecting a round of layoffs since Microsoft acquired Nokia for more than $ 7 billion, but the sheer size of the announcement was a surprise. Microsoft shares gained more than three per cent on the Nasdaq to a new 14-year high just over $45 on the news. By the end of the trading day, they were at $44.53.

"Microsoft needs to be a `leaner and meaner' technology giant over the coming years in order to strike the right balance of growth and profitability around its cloud and mobile endeavours,"FBR Capital Markets analyst Daniel Ives said.

The IBM-Apple partnership announced yesterday is expected to be a challenge to Microsoft, according toNeilBearse, associate director of marketing at the Queens School of Business.

CEO Satya Nadella is painting a picture of what the new Microsoft will look like. This round of layoffs sheds excess hierarchy and headcount, accumulated through the desktop PC era and the recent Nokia acquisition, he said.

While a leaner and more focused Microsoft might cut costs and improve focus, they face an uphill battle in the enterprise, thanks to the recent Apple-IBM partnership."