Microsoft will carry out one of its largest rounds of job cuts and a record book writedown in a restructuring plan that calls time on its ill-fated Nokia acquisition.
The Windows goliath confirmed on Wednesday (July 8) that 7,800 staff will go, primarily from its phone hardware business – the Nokia devices and services unit it bought in April 2014.
Microsoft’s last single big round of cuts saw the axe taken to 5,000 posts in 2008 and 2009, as the Western economies hit meltdown and the company cut its costs. This round of layoffs and restructuring will cost Microsoft between $750m and $850m.
But the bad news for the Nokia legacy doesn’t stop there.
Its decision will also see Microsoft report the biggest writedown in its history – $7.6bn, which will show up in the fourth quarter for fiscal 2015 this month. This figure busts Microsoft’s existing write-down record of $6.2bn in 2012, for defunct online ads operation aQuantive.
In a statement, Microsoft said the $7.6bn represented an impairment adjustment on its Phone Hardware segment assets and goodwill.
Microsoft closed its acquisition of Nokia’s mobile business just 15 months ago, having paid $7.2bn under ex-CEO Steve Ballmer.
Successor Satya Nadella had hinted at cuts in his recent "magic" memo to staff.
Explaining its decision, Microsoft confessed: “The future prospects for the Phone Hardware segment are below original expectations.”
Phone hardware made $1.4bn in Microsoft's third quarter, but making and selling phones cost Microsoft $1.4bn. The phone hardware unit made $4m in losses on gross margin. Microsoft's sales lag even those of Windows Phone partners: 8.6 million Lumias (Nokia) moved versus 24.7 million non-Lumias sold.
It is restructuring the phone hardware business to “better focus and align resources”.
Also out on Wednesday is mapping technology and image collection owned by Bing Maps, which is going to taxi-less taxi firm Uber. ®
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