Wall Street welcomes Microsoft job cuts

Microsoft to eliminate 18,000 jobs

Wall Street welcomed the sweeping job cuts announced by Microsoft on Thursday, sending shares to new highs.

Microsoft will cut 18,000 jobs, or 14 percent of its workforce, over the next year, as the technology company trims its newly acquired Nokia phone business and seeks to focus on its cloud computing services and mobile-friendly software.

Read MoreMicrosoft plans to cut up to 14 percent of staff

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

A pedestrian walks past the Microsoft campus in Redmond, Wash.
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The larger-than-expected cuts are the deepest in the company's 39-year history and come five months into the tenure of CEO Satya Nadella, who outlined plans for a "leaner" business in a public memo to employees last week.

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About 12,500 of the layoffs will come from eliminating overlaps with the Nokia unit, which Microsoft acquired in April for $7.2 billion.

"This is a pretty significant cut, and I think it tells you that Satya Nadella is trying to put his own stamp on the company and I think it also tells you that he's not going to let Nokia become a quagmire, in terms of dragging down the potential efficiencies in the business," Materne said on "Squawk Box."

What Microsoft cuts signal

Technology analyst Richard Sherlund agreed, calling the cuts "a pretty bold move."

"It signals that Microsoft is not going to get kinda on this slippery slope with Nokia. They're actually going to trim the Nokia cost structure very substantially," Sherlund, managing director and head of U.S. technology equity research at Nomura, said on "Squawk on the Street."

Wall Street had viewed Microsoft as bloated under previous CEO Steve Ballmer, topping 127,000 in head count after absorbing Nokia earlier this year.

Read MoreNokia opens a new chapter as it closes Microsoft deal

"That was something that was worrying investors; that this acquisition could really dilute earnings going forward," Sherlund said. "It'll still have an impact, but this will mitigate that I think."

Though Microsoft shares spiked on the announcement, Sherlund thinks it could continue to climb. He maintains a "buy" rating and $50 price target on the stock.

—By CNBC's Drew Sandholm, with Reuters.