Shares in US technology firm Microsoft are trading around 1% lower pre-market on Friday. The company recently confirmed that it will pay $3,000,000 in interest-added back pay in a bid to conclude a US Federal investigation into claims that Microsoft illegally passed-over qualified ethnic work applicants.
The Department of Labor accused Microsoft of having discriminated against 1,299 qualified Asian, African-American, and Hispanic applicants. They had applied for positions including software engineer, solution specialist, developer, and premier field agent.
Early Resolution Conciliation Agreement
The settlement agreement, which was signed on September 4th, has been called the “Early Resolution Conciliation Agreement”. It will effectively put an end to the ongoing federal probe into Microsoft’s hiring practices.
Microsoft has agreed to submit detailed progress reports regarding its hiring operations over the coming years. However, they deny the alleged discrimination and say that the settlement is not an admission of any wrongdoing.
The settlement itself, which comprises $2.55 million in back pay and $450k pay in interest payments will be shared among all the affected applicants.
Microsoft Sentiment Weakens Following Settlement
Microsoft shares have come under heavy selling pressure over recent weeks following news of the settlement. The company had previously enjoyed a firm rally in its share prices in response to a solid Q2 earnings report. Microsoft reported earnings per share of $1.46, beating estimates of a $1.34 EPS. The company reported revenues of $36.9 billion over the quarter. This included a net income of $11.6 billion.
Commenting on the quarter’s results, Microsoft’s CEO Satya Nadella said:
“We are innovating across every layer of our differentiated technology stack and leading in key secular areas that are critical to our customers’ success”.
In the statement, Nadella went on to say:
“Along with our expanding opportunity, we are working to ensure the technology we build is inclusive, trusted, and creates a more sustainable world, so every person and every organization can benefit.”
Rise In Cloud Revenues
One of the main drivers behind Microsoft’s success was the large growth in the group’s cloud computing business. This recorded a 30% rise year-on-year. Indeed, the robust growth seen in Microsoft’s cloud business means that it is now larger than that of Google and IBM.
Microsoft Shares testing Key Support
Shares in Microsoft recently broke down through the rising trend line from 2020 lows and are now testing support at the 199.60 level.
Should price break below here, the next level to watch is the 190.69 level.
If buyers can defend the level, however, we are likely to see a rotation higher towards the 216.79 level which remains the key local resistance to note.