Along with the write-off, Microsoft announced it would lay off about 7,800 employees, a lot of them working in its device division, specifically the phone group. Accordingly, the company concluded that an impairment adjustment of its Phone Hardware segment assets and goodwill of approximately $7.6 billion is required.
With Wednesday’s announcement, the Nokia acquisition – which closed just over a year ago and was the last big move from former Chief Executive Steve Ballmer – joins that list. It had 118,600 employees at the end of March, with about 60,000 of them in the U.S.
While hedge funds remain big supporters of Microsoft, they aren’t exactly enamored with the state of the company’s business or its prospects for growth under Nadella at the current moment. “However, we need to focus our phone efforts in the near term while driving reinvention”.
“I am committed to our first-party devices, including phones”, Nadella said.
In addition to the cuts, Nadella also told workers on Wednesday to brace for a restructuring charge of “approximately $750 million to $850 million”.
While most of the job cuts will target the phone division, Nadella insisted that Microsoft will keep making smartphones. In the last few weeks ex- CEO of Nokia, Stephen Elop, and head of phones, Jo Harlow both chose to part ways with Microsoft Corporation (NASDAQ:MSFT).
Microsoft isn’t getting out of the phone business, even after confirming it sees little tangible value left in Nokia.
The partnership between Microsoft and the two ad services was announced Monday on the company’s official blog.
After Nadella took over Microsoft, he made it clear that he would have to make aggressive changes to revitalize the company. “It’s likely also the first step in a slow winding down of the mobile devices business in favor of either abandoning mobile entirely or at least ceding much of that opportunity to third parties”.
The move to issue pink slips comes at a time when the company is on the verge of releasing a new version of its Windows Operating System for desktops, smartphones and other devices.
Nadella, who became CEO in 2014, is seeking to reinvigorate a company that had been the world’s largest but which has lagged in recent years as Google and Apple have taken leadership of the tech sector.
But Nadella has been moving away from this strategy in order to focus on the company’s core software business and related services.
When the layoffs wrap up, Microsoft will have retained just one out of every five ex- Nokia employees it inherited, Dawson calculated.
It plans to start rolling out Windows 10 in late July, introducing a new operating system which can be used to power not only personal computers but a range of mobile devices.
“The launch of Windows 10 will solidify their intent to cater to consumers better, with significant improvements to the OS…(but) companies will take some time to migrate to Windows 10 (many still use Windows XP, which is no longer actively supported by Microsoft) as they would want to wait till the product is stable”, Gogia said.