Microsoft CEO Satya Nadella
Microsoft is expected to announce a major restructuring of its cloud services today, with thousands of jobs on the line PHOTO: Bhupinder Nayyar

UPDATE: This story has been updated with confirmation of layoffs.

Microsoft is expected to announce a major reorganization of its sales team today that will place renewed focus on its cloud-based products and will result in potential layoffs.

According to reports from the Reuters news agency, staff at the Redmond, Wash.-based giant were told Monday that the reorganization would affect both sales and marketing.

“Microsoft is implementing changes to better serve our customers and partners,” a Microsoft spokeswoman told Reuters. She did not mention any job cuts.

A Renewed Push to the Cloud

However, many reports, including one from the financial wire TheStreet, predict thousands of jobs will be cut, with Bloomberg stating the cuts will be some of the "most significant in the sales force in years." Microsoft officials, including CMO Chris Capossela, executive vice presidents Judson Althoff and Jean-Philippe Courtois, publicly discussed the reorganization, also without mention of layoffs.

The restructuring will reportedly result in Microsoft merging its enterprise customer unit and its small-to-medium enterprise business units.

Microsoft confirmed the job cuts on Thursday. While it didn’t provide specific numbers, the New York Times reported as many as 4000 jobs would be cut. Most of the job cuts will reportedly affect employees working in Europe, where negotiations over terms will have to take place. 

Microsoft issued a statement saying: 

“Microsoft is implementing changes to better serve our customers and partners. Today, we are taking steps to notify some employees that their jobs are under consideration or that their positions will be eliminated. Like all companies, we evaluate our business on a regular basis. This can result in increased investment in some places and, from time-to-time, re-deployment in others.” 

According to the company website, Microsoft employed an estimated 120,000 people globally as of March 31, with sales and marketing teams accounting for roughly 19 percent of the workforce. 

The reorganization of the sales team has been on the cards since Althoff and Courtois took over the Worldwide Commercial Business and the global sales and marketing group respectively, following Chief Operating Officer Kevin Turner's departure in 2016.

The move also reflects the declining enterprise interest in desktops and the rise of cloud services offered out of Microsoft data centers globally.

Layoffs at a Time of Cloud Growth

Microsoft will effectively end its financial year with its scheduled fourth quarter results announcement on July 20, with major increases in revenues from cloud services expected.

The restructuring follows a pattern set since Satya Nadella assumed the CEO role in 2014. At the time he stated his intention of turning Microsoft into a cloud services company, and has made good on that promise with the company now issuing updates on a near-weekly basis. As Wired noted, the company has timed employee redundancy announcements to coincide with the end of its financial year the last two years running. 

The reorganization is also a response to a growing market for cloud services and storage, which was demonstrated in its April earnings release

In fact, some of that report's highlights show just how profitable the cloud service businesses have become, with Azure nearly doubling its revenue growth from the previous quarter. Elsewhere:

  • Office commercial products and cloud services revenue increased again, driven by Office 365’s commercial revenue growth of 45 percent
  • Office consumer products and cloud services revenue increased 15 percent while Office 365 consumer subscribers increased to 26.2 million
  • Dynamics products and cloud services revenue increased 10 percent, driven by Dynamics 365 revenue growth of 81 percent

Nadella clearly means to continue. At Build this year he pushed his ‘Cloud’ vision even further, sharing a vision of unified user experiences across all devices and a switch from his "Cloud First, Mobile First" mantra to "Intelligent Cloud and Intelligent Edge."

While news of the company's success will be little comfort for any workers who do lose their jobs in the reorganization, it does take Microsoft another step closer to being a cloud company that can compete with Amazon.