Layoffs crash into Microsoft's Azure for Operators

According to several new reports, tech giant Microsoft is engaging in a series of layoffs in businesses stretching from cloud to mixed reality. The company is also taking the ax to its Azure for Operators business, which sells software that allows telecom network operators to put their systems into the cloud.

A Microsoft representative confirmed to Light Reading that the company's layoffs would affect its Azure for Operators business. "Organizational and workforce adjustments are a necessary and regular part of managing our business. We will continue to prioritize and invest in strategic growth areas for our future and in support of our customers and partners," the company said in a statement.

Microsoft officials did not respond to follow-up questions from Light Reading on the scope of the layoffs within Azure for Operators, and how that might affect the vendor's overall telecom strategy.

However, Business Insider reported that Microsoft will cut as many as 1,500 in its Azure for Operators and Mission Engineering units. In a separate article, the publication reported that Microsoft's Jason Zander credited the layoffs to Microsoft putting more investment into artificial intelligence, and that the company would halt previews for Azure Operator 5G Core (AO5GC) and Azure Operator Call Protection. The publication also reported that some employees in Microsoft's Azure Operator Nexus will join the vendor's Cloud + AI organizations' Azure Edge and Platform product line.

CRN noted that Microsoft had 221,000 employees worldwide as of June 30. And The Verge added that this is Microsoft's latest round of layoffs, and that other tech companies have engaged in similar cullings in recent months.

Raising questions

The move "certainly calls Microsoft's dedication to the telco market into question," wrote Scott Raynovich, an analyst with Futuriom. "It makes sense, given how difficult the telco market has been. Telco capex spending is expected to be down this year and cloud operators continue to take networking market share from telcos, according to our research. In the scheme of things, it was too small a business for Microsoft."

Already some in the telecom industry are headhunting for affected Microsoft employees.

Microsoft's Azure for Operators is built on the company's acquisitions of Affirmed Networks, Metaswitch Networks and AT&T's core network operations – purchases that likely total at least $2 billion. First announced in 2020, Azure for Operators is essentially Microsoft's response to similar offerings from other hyperscale players like Google and AWS.

AT&T is a major customer for Azure for Operators. That's because Microsoft purchased AT&T's Network Cloud 2.7 software technology in a transaction announced in 2021. That move allowed Microsoft to use AT&T's software to flesh out its Azure for Operators product while concurrently taking over that part of AT&T's networking operations. AT&T though won't be affected by Microsoft's layoffs, in part because AT&T runs its Azure system internally.

Now, AT&T is moving forward with a major, $14 billion agreement with Ericsson for a broad network upgrade project.

During this year's MWC Barcelona trade show, Emirati operator Etisalat emerged as Microsoft's second customer for Microsoft's Nexus platform, after AT&T. Shawn Hakl, VP of 5G strategy for Microsoft and a former Verizon executive, helped to develop the company's new Azure Operator Nexus platform.

Microsoft's latest layoffs dovetail with similar trends in the global telecom industry. Amid a drastic downturn in spending by telecom network operators, big vendors like Nokia and Ericsson have engaged in thousands of layoffs while smaller vendors like Casa Systems and Airspan have filed for bankruptcy.