Microsoft to cut up to 7,800 jobs in phone biz

Jul 08, 2015, 4:07 PM EDT
A Microsoft logo is seen during the 2015 Microsoft Build Conference on April 29, 2015 at Moscone Center in San Francisco, California.
Stephen Lam/Getty Images

Microsoft said it will cut up to 7,800 jobs, mostly in its phone business as it takes on a new strategy. Microsoft said on Wednesday it would cut 7,800 jobs, or nearly 7 percent of its workforce, and write down about $7.6 billion related to its Nokia phone business, reports Reuters. Most of the job cuts will be in the phone hardware business, underscoring the company's shift in focus to software and cloud from hardware. About a third of the layoffs will be in Finland, where Microsoft will shut down a product development unit, according to Finland's national broadcaster YLE.

This is the second round of job cuts since Satya Nadella took over as chief executive in February 2014. Microsoft said last July it would slash up to 18,000 jobs. Nadella has played up Microsoft's cloud and enterprise software capabilities, but investors have been concerned that the transition to cloud was not offsetting weakening sales of Windows and Office and a bleeding phone business. Microsoft was widely expected to write off all or part of the $7.2 billion it paid for Nokia's handset unit in 2014, a deal that left the company with a struggling business and only 3 percent of the smartphone market.

The move is a clear acknowledgment that the deal was a multibillion-dollar strategic blunder by Mr. Ballmer, who had envisioned it as a way to make Microsoft more competitive in the mobile market dominated by Apple, Google and Samsung, notes the New York Times. Mr. Nadella is said to have disliked the acquisition originally, though he publicly endorsed it after becoming chief executive. “It’s a headache that Nadella inherited,” Daniel Ives, an analyst at FBR Capital Markets, said. “It is really cleaning up Ballmer’s mess.”

The job cuts amount to more than 6 percent of Microsoft’s global work force. Combined with 18,000 job cuts last year, most of them also related to the Nokia acquisition, Microsoft will end up letting go the majority of workers who joined the company as a result of the deal. Microsoft said it would take a $7.6 billion accounting charge related to its acquisition of Nokia’s handset operations. It completed its acquisition of Nokia last year for $9.5 billion, though Nokia came with about $1.5 billion of cash as part of the deal. While Microsoft will not stop making smartphones, Mr. Nadella said on Wednesday that it would no longer focus on the growth of that business, instead emphasizing the expansion of the broad “ecosystem” of products, including mobile phones, that run its Windows software. “I am committed to our first-party devices, including phones,” Mr. Nadella said in an email to Microsoft employees. “However, we need to focus our phone efforts in the near term while driving reinvention.”