Microsoft (NASDAQ:MSFT) will lay off thousands of its employees in “a matter of days,” Sky News reported yesterday. The U.K.-based media outlet did not cite its source for the news about the Microsoft layoffs. In early trading, MSFT stock advanced 1%.
Microsoft reportedly intends to lay off 5% of its workforce, or about 11,000 positions. According to Bloomberg, the Microsoft layoffs will include a number of engineering positions.
Microsoft’s Potential Issues
Speaking at the World Economic Forum in Davos, Switzerland today, Microsoft CEO Satya Nadella indicated he believes the global economy is slowing. The CEO added the demand for tech products was decelerating following a surge in such demand during the pandemic.
“[Tech companies] will have to do more with less,” he said.
Earlier this month, Swiss bank UBS downgraded MSFT stock, warning its cloud business Azure was “entering a steep growth deceleration” that could be worse than the Street anticipates. Calling the valuation of MSFT stock “fair,” UBS cut its price target on the name to $250 from $300.
Yesterday, research firm Guggenheim downgraded MSFT to “sell” from “neutral,” citing the impact of a potential recession and reduced PC demand. The firm placed a $212 price target on the shares.
What to Watch With MSFT Stock
Microsoft is due to report its fiscal second-quarter results on Jan. 24. Meanwhile, in an apparent effort to take on Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google, Microsoft is said to be negotiating an investment of a signficant amount of money in ChatGPT, an artificial intelligence-driven database. The company is also reportedly considering integrating the product into its offerings.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.