Microsoft is embarking on the deepest cuts to its workforce in its 39 year history, axing 18,000 jobs over the next year, as it absorbs its newly acquired Nokia phone business and takes out layers of management.

The new boss of the US company is cutting one in seven of the tech giant’s 127,000 global workforce as it attempts to integrate the Finnish business it acquired in April for $7.2bn.

Satya Nadella, the firm’s chief executive for just five months, first hinted at job cuts last week when he outlined plans for a leaner business. That led to speculation about sweeping job cuts, but expectations underestimated the 18,000 job losses announced yesterday, which propelled the tech giant’s shares to their highest level since the dotcom boom in 2000, gaining 1.5% to $44.84.

The cuts will mostly come from Nokia, which added 25% more staff to the Microsoftworkforce. Until now, the largest round ofredundancies in Microsoft history was in 2009, when it cut 5,800 employees.

“My promise to you is that we will go through this process in the most thoughtful and transparent way possible,” Nadella said in an open letter on Thursday.
Nokia’s former chief executive Stephen Elop, who is now vice-president for devices at Microsoft, sent a lengthy letter to staff which began with “hello there” and was peppered with management jargon such as “ramp down”, “right-size” and outlining a desire to “help people ‘do more’”.

It is only in the final paragraphs that Elop acknowledges 12,500 professional and factory workers will be axed from Nokia’s devices and services division. “These decisions are difficult for the team, and we plan to support departing team members with severance benefits,” said Elop, who received a controversial £16m payoff from Nokia before signing up to join Microsoft.

Nadella said 13,000 staff would receive redundancy notifications in the next six months. All will receive severance pay and some will receive job placement services.

It was not clear where in the world the axe will fall, but the cuts could begin with 1,350 redundancies in Seattle. When Nokia was acquired by Microsoft, the Finnish phonemaker operated 130 sites in 50 countries. Including those, Microsoft runs 717 sites across 114 countries.

Nadella said the cuts were caused by the absorption of Nokia into the larger organisation and because he intended to embark what as described as “work simplification”.

“It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas,” he said. He did not offer details about what new positions might be added.

“The overall result of these changes will be more productive, impactful teams across Microsoft … We will simplify the way we work to drive greater accountability, become more agile and move faster,” he said, indicating there would fewer layers of management.

The exercise will cost between $1.1bn and $1.6bn over the coming 12 months.
The Nokia deal had been set in train by the former Microsoft chief executive Steve Ballmer as a way to move into mobile devices, an area that has not traditionally been a strong one for Microsoft.

Other technology companies are also wielding the jobs axe to cut costs and focus on new internet-based technology. Hewlett Packard, for instance, is cutting 50,000 staff from its 250,000 workforce.

In April, Nadella and Elop emphasised growth in emerging markets, and aimed to provide the “next billion” people with their first phones – potentially worth $50bn a year.

“The vast majority of people do not have, nor will they ever have a personal computer,” Elop said. “And so there are literally billions of people who can be exposed to Microsoft for the very first time.”

Nadella took the reins from Steve Ballmer in February, and wrote last week’s 3,200-word letter to employees that emphasised the importance of cloud computing and mobile devices.

He is only the third boss of the business since it was created by Bill Gates, who was succeeded by Ballmer. Many saw the memo as foreshadowing cutbacks, but the size of the cuts was unexpected. Analysts had predicted more than 6,000 job cuts
Microsoft is due to publish its results on 22 July, when more details of the job cuts are expected.