MICROSOFT has announced it will slash up to 18,000 jobs, or 14 per cent of its workforce, this year as it trims its newly acquired Nokia phone business and tries to transform into a cloud-computing and mobile-friendly software company.

The larger-than-expected cuts are the deepest in the company's 39-year history and come five months into the tenure of Chief Executive Satya Nadella, who outlined plans for a "leaner" business to employees.

He told workers in a memo: "We will simplify the way we work to drive greater accountability, become more agile and move faster. We plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making."

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The size of the cuts were welcomed by Wall Street, which viewed Microsoft as bloated under previous CEO Steve Ballmer, topping 127,000 in headcount after absorbing Nokia earlier this year.

Daniel Ives, an analyst at FBR Capital Markets, said: "This is about double what the Street was expecting.

"Mr Nadella is clearing the decks for the new fiscal year.

"He is cleaning up part of the mess Ballmer left."

Microsoft shares jumped 3 per cent to $45.40 in early trading, reaching their highest since the technology stock boom of 2000. About 12,500 of the layoffs will come from eliminating overlaps with Nokia.