Microsoft plans to slash up to 18,000 jobs

CNBC With Reuters
Microsoft to eliminate 18,000 jobs
Microsoft to eliminate 18,000 jobs

Microsoft is cutting up to 18,000 jobs in the next year, CEO Satya Nadella said Thursday in a letter to employees. The cuts represent more than 14 percent of Microsoft's 127,000-person workforce.

Wall Street welcomes Microsoft layoffs

"That's clearly much higher than we were expecting. We, like most people, were thinking like 5,000 to 6,000," Kirk Materne, technology analyst at Evercore Partners, told CNBC right after the announcement.

As a result of the dismissals, Microsoft said, it will incur pretax charges of up to $1.6 billion for severance and related costs over the next four quarters.

"We are moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months," Nadella wrote. "It's important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas."

Nadella explained the cuts, saying they "simplify the way we work to drive greater accountability, become more agile and move faster." Microsoft will also have fewer layers of management, he said.

About 12,500 of the cuts will result from the company's "synergies and strategic alignment" with Nokia Devices and Services, Nadella said. Microsoft announced that it would acquired Nokia in September 2013.

Cramer: Microsoft has wrong workers
Cramer: Microsoft has wrong workers

"This is a significant cut that Satya Nadella is trying to put his own stamp on the company. It also tells you that he's not going to let Nokia become a quagmire," Evercore's Materne said on CNBC's "Squawk Box."

Some 25,000 Nokia workers moved this spring to Microsoft with the cellphone unit acquisition, 4,700 of them in Finland. Globally, Microsoft's headcount far exceeds rivals Apple and Google.

How's Microsoft's stock doing? (Click here for the latest quote.)

By CNBC. Reuters contributed to this report.