Microsoft axes 7,800 jobs, writes down Nokia

Seattle

MICROSOFT Corp plans to cut as many as 7,800 jobs and write down about US$7.6 billion on its Nokia phone handset unit, wiping out nearly the entire value of a business that failed to gain market share since it was acquired last year.

The company also will record a restructuring charge of about US$750-850 million for the reorganisation under chief executive officer Satya Nadella, the Redmond, Washington-based company said in a statement on Wednesday. Microsoft had about 120,000 employees at the end of March.

Mr Nadella is scaling back its mobile ambitions, seeking to tailor Windows devices for a narrower set of customers, instead of trying to sell as many mobile phones as possible in a market dominated by Apple Inc and Google Inc.

The latest round of job cuts - which include 2,300 in Finland, where Nokia is based - comes a year after Microsoft said that it would let go of 18,000 employees, and less than two weeks after the company announced plans to exit the Web display advertising business. Since becoming CEO last year, Mr Nadella has been acquiring mobile and cloud software makers, and cutting units not central to his strategy.

Last month, the 47-year-old executive made his biggest overhaul since taking over, revamping his leadership team to reflect a focus on three areas: personal computing, cloud platforms and business productivity. With the phone operation failing to make headway against devices using Apple's and Google's mobile operating systems, the company also said that Stephen Elop, the former CEO of the Nokia business that Microsoft bought, was stepping down.

Mr Nadella's restructuring plan includes sharply reducing the number of models that the company will release, now about one a week when counting variations for geographical markets, a person familiar with the plans said. Instead, Microsoft will release one or two models a year in each of three categories, said the source, who asked not to be named because the plans are not public. The categories are business-focused devices, phones for customers looking for low-price smartphones, and high-end devices for Windows enthusiasts.

The company also will exit locations and carrier relationships where it has not been successful, the source said. While the US has been a difficult market for Nokia, Microsoft is unlikely to stop making phones for the country because of its size, the source said. Pete Wootton, a company spokesman, declined to give details on the restructuring plans.

Microsoft will close its operations for high-end phones in Salo, Finland, focusing phone engineering in the country in Espoo and Tampere, according to a memo written by Terry Myerson, who runs the Windows and hardware group, and obtained by Bloomberg.

Microsoft also plans to shut its San Diego engineering facility and cut staff in Beijing, where it will focus on inexpensive phones and relationships with other device makers, according to the memo.

Microsoft purchased Nokia's handset business in April 2014 for US$9.5 billion, including US$1.5 billion in acquired cash. Seven months earlier, then-CEO Steve Ballmer announced plans to acquire the Finland-based unit as a last-ditch effort to gain users for Microsoft's Windows Phone software, which had been languishing at less than 5 per cent of the market for mobile operating systems.

The deal has not boosted Windows Phone's market share, however, and Microsoft loses money on every phone that it sells, even before accounting for research and development, and sales and marketing. The business already had cut more than 10,000 jobs.

The writedown - to be taken in the company's fiscal fourth quarter, which ended June 30 - is Microsoft's biggest since a US$6.2 billion charge in 2012 on the purchase of Internet ad company AQuantive Inc. It took five years for the Redmond, Washington-based company to record the AQuantive charge. BLOOMBERG