Microsoft CEO Satya Nadella Getty Images
Microsoft Corp.'s MSFT +1.47% new chief executive is wielding the ax as he seeks to remake the company.
Satya Nadella, the CEO since February, said Thursday that he would cut about 14% of Microsoft's workforce, or up to 18,000 people, over the next year, in his biggest move so far to reshape the software giant.
The layoffs will be the largest in Microsoft's history, surpassing the more than 5,000 positions eliminated in 2009.
The majority of the cuts—about 12,500 people—will come from areas of overlap withNokia Corp.'s NOK1V.HE -0.27% mobile-phone business, which Microsoft acquired in April and pledged to cut significantly. Microsoft absorbed about 25,000 people in the Nokia deal.

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Microsoft also disclosed it would stop making mobile phones powered by Google Inc.'s Android operating system. Nokia earlier this year introduced low-cost Android phones, known as the Nokia X line, putting Microsoft in the odd position of selling phones supporting the software of its arch rival Google. The Nokia X line will give way to lower-priced phones running Microsoft's own Windows Phone software, though the company said it will continue to sell and support existing Nokia X devices.
The company offered few other specifics in its announcement, but advertising-sales businesses, marketing functions, and parts of its engineering operations also have been preparing for job cuts, according to people familiar with the matter.
The job cuts are a sign Mr. Nadella, only the third CEO in Microsoft's 39-year history, isn't afraid to break from his predecessors, Bill Gates and Steve Ballmer, who favored pruning Microsoft's ranks to large-scale layoffs. The cuts also will test whether Mr. Nadella, who has won high marks so far from employees, investors and technology-industry executives, has built enough goodwill to make tough changes without second guessing.
Stockholders, and some Microsoft employees, say the company's most urgent need is to become more focused and nimble to keep pace in increasingly competitive technology industries. The question is whether significant workforce cuts and a rethinking of how work gets done at Microsoft will help kick start innovation.
Microsoft employees have been anxious for weeks as rumors of layoffs spread, and Mr. Nadella issued a companywide memo last week that foreshadowed a shake-up in Microsoft's culture and organizational makeup.
"Our ambitions are bold and so must be our desire to change and evolve our culture," Mr. Nadella wrote in last week's memo, which used the word "change" or a variant 14 times. In a note to employees Thursday outlining the job cuts, Mr. Nadella said, "decisions to change are difficult, but necessary."
Microsoft said it would record expenses of $1.1 billion to $1.6 billion before taxes over the next four quarters to reflect severance costs and benefits, and from "asset-related charges." Microsoft is slated to report its quarterly financial results Tuesday, and Mr. Nadella has said he would detail then the financial impact of his plans for the company.
Microsoft's workforce ballooned in recent years, from about 89,000 employees in 2010 to more than 127,000 people after the Nokia acquisition. Microsoft previously said it would cut at least $600 million in duplicative costs within 18 months of the Nokia acquisition.
Morgan Stanley MS +0.65% estimated in a recent research note that a 10% reduction in Microsoft's head count would shave roughly $2.4 billion from annual operating expenses and boost yearly earnings by roughly 20 cents a share. That would barely be enough to offset the expected drag on profits from the Nokia business.
Investors have wanted Microsoft to cut costs and show it can be disciplined about pouring money into the Nokia business.
"While the cuts will be painful for employees, they were necessary…and speak to Nadella's attempt at cleaning up part of the mess that Ballmer left behind," FBR Capital Market wrote in a research note.
Mr. Nadella also reiterated he wants to change the nature of work at Microsoft. In the email to employees Thursday, Mr. Nadella said the job cuts were motivated by squeezing costs out of the Nokia integration and by "work simplification." Mr. Nadella in his memo said Microsoft planned to prune layers of management to speed up decisions, and change the company's engineering processes.
"The overall result of these changes will be more productive, impactful teams across Microsoft," Mr. Nadella wrote.
Write to Shira Ovide at shira.ovide@wsj.com