Microsoft's big AI ambitions helped it become the world's most valuable company but at the expense of its Azure team, according to a leaked email memo

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The latest round of layoffs affecting Microsoft's Azure team was sponsored by its aggressive AI dreams.

What you need to know

  • Microsoft was recently impacted by another round of layoffs affecting its HoloLens 2 and Azure departments.
  • This is despite the tech giant's impressive earnings and rise to become the world's most valuable company, with $3 trillion in market capitalization.
  • A leaked email memo suggests that Microsoft is making changes (layoffs) in its Azure department to pave the way for its AI advances and efforts.

Microsoft has been hit by layoffs, cutting across virtually all its departments. At the beginning of 2023, the company CEO Satya Nadella announced that it would cut 10,000 jobs by the end of FY23 Q3. The bloodbath continues with the most recent round of layoffs affecting the company's gaming department. 1900 people lose their jobs across Activision Blizzard, Xbox Game Studios, and ZeniMax Media.

The Redmond giant is in top form and is now the world's most valuable company, ahead of Apple with over $3 trillion in market capitalization. Market analysts predict Microsoft is on the verge of hitting its iPhone moment with AI, consistent with its latest earnings call report.

With the vast increase in revenue, operating income, net income, and more, you'd suppose Microsoft would dial down on the massive layoffs. But this isn't the case. Earlier this week, Microsoft announced another round of layoffs. This time, affecting 1,000 employees in its HoloLens 2 and Azure departments (via CNBC).

Interestingly, a Microsoft Spokesman confirmed that the company isn't pulling the plug on the production of the augmented reality headset and intends to stay the course while speaking to The Verge:

"We remain fully committed to the Department of Defense’s IVAS program and will continue to deliver cutting-edge technology to support our soldiers. In addition, we will continue to invest in W365 to reach the broader Mixed Reality hardware ecosystem. We will continue to sell HoloLens 2 while supporting existing HoloLens 2 customers and partners."

Microsoft's big push for AI might be the problem

(Image credit: Image Creator from Designer | Kevin Okemwa)

As it turns out, Microsoft is seemingly making these changes and layoffs to pave the way for its AI advances and efforts. In a leaked memo seen by Business Insider, executive Jason Zander indicated:

"Our clear focus as a company is to define the AI wave and empower all our customers to succeed in the adoption of this transformative technology. Along the way, we make decisions that align with our long-term vision and strategy while ensuring the sustainability and growth of Microsoft."

For context, Zander used to lead Azure and now runs the Strategic Missions and Technologies (SMT) team. SMT runs point on Microsoft's cutting-edge projects like quantum computing and more. However, the company has seemingly shifted its focus to AI. 

RELATED: Ex-Microsoft HR VP reveals why most executives don't take pay cuts to prevent massive layoffs

Consequently, Zander stated that Microsoft intends to halt services in preview, including Azure Operator 5G Core (AO5GC) and Azure Operator Call Protection. Interestingly, Azure's Operator Nexus team will transition to the Cloud + AI organizations' Azure Edge and Platform product line. This isn't exactly new in Microsoft's AI playbook. A few days after the EU antitrust watchdog forced Microsoft to unbundle Teams from Office 365 globally, we learned that the company had transitioned some of its staffers from the Teams Chat app to help with Copilot AI-themed projects. 

In a separate report, Microsoft insiders have openly aired their concerns regarding Microsoft's complicated relationship with OpenAI, citing it has turned into an overnight "glorified IT department for the hot startup." 

Insiders further indicated that the complicated relationship has negatively impacted Microsoft's AI Platform team, which is central to homegrown AI advances and development. 

Unfortunately, this contributed to the loss of one of Microsoft's top executives. Microsoft is reportedly overreliant on OpenAI for most of its AI advances, which has led to the death of products like Azure Cognitive Search, Azure AI Bot Service, and Kinect DK.

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Kevin Okemwa
Kevin Okemwa
Contributor

Kevin Okemwa is a seasoned tech journalist based in Nairobi, Kenya with lots of experience covering the latest trends and developments in the industry at Windows Central. With a passion for innovation and a keen eye for detail, he has written for leading publications such as OnMSFT, MakeUseOf, and Windows Report, providing insightful analysis and breaking news on everything revolving around the Microsoft ecosystem. You'll also catch him occasionally contributing at iMore about Apple and AI. While AFK and not busy following the ever-emerging trends in tech, you can find him exploring the world or listening to music.

3 Comments Comment from the forums
  • GothardJ2
    The article mentions that Azure Cognitive Search (renamed Azure AI Search) and Azure Bot Services have been (maybe will be) killed off. I'm not seeing anywhere in Microsoft's site that this is the case. Very much seem like they are sticking around, and still being developed as alternatives to other solutions. Much like WinUI and WPF are different options to do a similar task. Is the death of these products being stated because they now rely on OpenAI as opposed to Microsoft built AI?
    Reply
  • Cmndr_Bytes
    I believe I have stated it before but MS always seems to have ADD. They seem to go all in on one thing and then when the new big thing comes out they jump over to that and leave the last behind.
    Why can't they find a balance and quit yelling "squirrel!" They have the money to do more than one thing.
    They need to quit trying to put all their digital eggs in one basket.
    Reply
  • Arun Topez
    Cmndr_Bytes said:
    I believe I have stated it before but MS always seems to have ADD. They seem to go all in on one thing and then when the new big thing comes out they jump over to that and leave the last behind.
    Why can't they find a balance and quit yelling "squirrel!" They have the money to do more than one thing.
    They need to quit trying to put all their digital eggs in one basket.
    Been saying the same thing! They never learn from their mistakes, which is why they keep repeating them. Always putting all their eggs in one basket while screwing over all their other products/teams, which then bring them behind while the competition catch up. Strangely this time it's Azure, which is a big part of it still, but they probably over-hired for Azure, which again is another repeat issue they do. And same with product/feature releases, they always announce/release things either too early (buggy, unfinished, major privacy issues, using users are their QA, etc.) or too late (mobile). It's sad because I used to be a hardcore MS fanboy, but there's no point in trying to defend them anymore if they keep repeating the same mistakes and are becoming more anti-human (against their employees, against users, etc.) and the few things they do right they either abandon or let it slip eventually.
    Reply