A Microsoft executive shows off the Surface Pro 3 tablet...

A Microsoft executive shows off the Surface Pro 3 tablet device on May 20, 2014. On July 15, 2014, sources are saying the company is heading for a big layoff. Credit: AP / Mark Lennihan

Microsoft Corp. is planning its biggest round of job cuts in five years, as the software maker looks to slim down and integrate Nokia Oyj's handset unit, people with knowledge of the company's plans said.

The reductions -- which may be disclosed as soon as this week -- will probably be in areas such as Nokia and divisions of Microsoft that overlap with that business, as well as marketing and engineering, said the people, who asked not to be identified because the plans aren't public. The restructuring may end up being the biggest in Microsoft history, topping the 5,800 jobs cut in 2009, two of the people said. Some details are still being worked out, two of the people said.

The announcement would come one week after chief executive Satya Nadella issued his first company mission statement, calling for greater emphasis on mobile devices, cloud-computing and productivity software. In the July 10 memo, which also called for Microsoft to become more focused and efficient, Nadella, who took over from Steve Ballmer in February, said he would provide more specifics on implementation later this month.

While Microsoft has undergone smaller, intermittent job cuts in individual businesses -- like trimming a few hundred positions in advertising sales and marketing in 2012 and some marketing jobs across the company earlier that same year -- the company has only undertaken a companywide restructuring impacting thousands of workers once before, in 2009 at the start of the recession. Over the course of that year, the company cut 5,800 jobs, or about 5 percent of its workforce at the time.

Some of the job cuts will be in marketing departments for businesses such as the global Xbox team, said the people. The European Xbox team is based in the United Kingdom.

Peter Wootton, a spokesman for Redmond, Washington-based Microsoft, declined to comment.


The company had 127,104 employees as of June 5, after adding about 30,000 in its acquisition of Nokia's handset unit.

When Microsoft agreed to acquire Nokia's mobile-phone business in September, the software maker pledged $600 million in annual cost savings in the 18 months after the deal closes. Meeting that commitment will probably involve job cuts in areas where the two companies overlap, said the people. Other job cuts may result from changes Nadella is making to the engineering organization, people with knowledge of the matter said last week.

Engineering teams have traditionally been split between program managers, developers and testers. Yet with new cloud methods of building software, it often makes sense to have the developers test and fix bugs instead of a separate team of testers, Nadella said in an interview last week after unveiling his memo.


Some of the cuts will be among software testers, said one of the people.

Nadella declined to say in the interview whether the changes will result in job cuts and said he would provide more detail on the implications of his memo when Microsoft reports fiscal fourth-quarter earnings on July 22.

Microsoft is the latest technology company seeking to reduce costs by trimming jobs. Hewlett-Packard Co. in May announced more cuts after an 11th-straight quarter of declining sales. CEO Meg Whitman has said she will eliminate as many as 16,000 jobs on top of 34,000 already cut.

Separately Microsoft is in talks to acquire Israeli security firm Aorato, a maker of firewall software backed by Accel Partners, said one person familiar with the discussions. The talks are at an early stage and Aorato may also be negotiating with other parties, the person said.

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