Preston Gralla

Expect the big ax to fall at Microsoft. Here's where the cuts might be.

July 11, 2014 2:30 PM EDT

Microsoft CEO Satya Nadella yesterday hinted that job cuts were coming to Microsoft, and multiple sources are reporting that they're all but a done deal. Where might the cuts be, and how many people will be involved? I've rounded up the best thinking on how it all might shake out.

In a memo to Microsoft employees yesterday about the company's future, Nadella all but said there would be job cuts. That's clearly what he was getting at when he said that the company would need to:

"flatten the organization and develop leaner business processes."

When you "flatten" an organization, you cut away middle managers. So if I was a middle manager at Microsoft, I'd be polishing up my resume today. As for developing "leaner business processes," those are code words for layoffs.

Bloomberg News says that cuts are very likely to occur, reporting

People familiar with the company's plans said reductions will probably happen.

As to where the cuts might come from, the biggest target will probably be at Nokia and people who work on Windows Phone, Bloomberg reports. That makes sense, because Microsoft has said it is going to cut $600 million annually for 18 months in areas where Nokia and Microsoft intersect.

Another area primed for cuts is people who test and fix software bugs, according to Bloomberg. Currently, engineering teams are composed of program managers, developers and testers. Bloomberg reports that Nadella has said that it makes sense for developers to do the bug testing and fixing, not a separate staff.

As to how big the cuts will be, no one at Microsoft is talking. But analyst Rick Sherlund, a long-time Microsoft watcher, wrote a note to his clients this morning in which he said he expected cuts of between 5% and 10%, according to Geekwire. Those are big-time cuts. Considering that Microsoft now has 127,000 employees, that could mean layoffs of up to 12,700 people.