July 15 (Bloomberg) -- 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.
Chief Executive Officer Satya Nadella said in an interview last week that he has preparing to make sweeping changes at Microsoft. The reductions will probably be in engineering, marketing and areas of overlap with Nokia, said the people, who asked not to be identified because the plans aren’t public.
The restructuring -- which may be unveiled as soon as this week -- 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.
Nadella, who took over from Steve Ballmer in February, said in the interview that Microsoft would have to become more focused and efficient. The CEO issued his first company mission statement last week, calling for greater emphasis on mobile devices, cloud-computing and productivity software as consumers and businesses buy fewer personal computers to check e-mail, browse the Web and access data and software.
“Nothing is off the table in how we think about shifting our culture,” Nadella said in the interview.
Nadella, a Microsoft veteran who joined in 1992, was promoted to speed up a turnaround at the software maker after Ballmer failed to deliver hit products that could take on smartphones and tablets from Apple Inc., Samsung Electronics Co. and other technology rivals.
While Microsoft has undergone smaller, intermittent job cuts in individual businesses -- for example 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.
Microsoft shares rose less than 1 percent to $42.45 at the close in New York, and are up 13 percent this year.
Peter Wootton, a spokesman for Redmond, Washington-based Microsoft, declined to comment.
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 Reading, U.K.
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 the interview last week. 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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