Approximately 12,500 workers will be cut from its Nokia subsidiary, which it acquired in April this year.
Microsoft has an overall workforce of 127,000 globally, and it is aiming to cut approximately $600 million per year in costs within 18 months of closing the Nokia acquisition.
Microsoft's new CEO Satya Nadella, who took the reins in February, is in the early phases of implementing his strategy to move the company away from software and develop more online services, applications and devices.
In an announcement released yesterday, he said: "Making these decisions to change are difficult, but necessary."
The restructure will be completed by the end of June next year, and the cuts, including severance pay, will cost Microsoft approximately $1.6 billion over the next year.
After a series of delays, the US tech giant acquired Finnish operator's Nokia's mobile business for €5.44 billion.
