Microsoft’s $9.5 billion acquisition of the Nokia phone handset business in 2014 is even more of a bust than the company recognized last year when it cut 7,800 jobs — about 7% of its workforce– and took a $7.6 billion impairment charge related to the purchase.
Today Microsoft says that it will slash up to 1,850 additional jobs at the smartphone hardware business and take a $950 million writedown, which includes $200 million for severance.
Microsoft shares are up 1.2% following the announcement.
“We are focusing our phone efforts where we have differentiation — with enterprises that value security, manageability and our Continuum capability, and consumers who value the same,” Microsoft CEO Satya Nadella says. “We will continue to innovate across devices and on our cloud services across all mobile platforms.”
About 73% of the job losses will take place in Finland. The rest will be spread across Microsoft globally. Most of the layoffs will be made by year-end, with the task fully complete by July 2017.
“Ever since Microsoft took over Nokia’s mobile phone business, as one of the final acts of Steve Ballmer’s reign, its smartphone strategy has been too ambivalent to succeed,” says IDC Europe Associate VP, Mobility .John Delaney. “Microsoft has neither made a wholehearted commitment to driving mass-market uptake, with commensurate levels of resource and senior management buy-in; nor has it focused solely on the market segments in which the strengths of its smartphone offering play most effectively. Now, at last, Microsoft’s ambivalence is over. It has chosen to follow the second of these strategic paths, by scaling back its smartphone operations and concentrating its efforts completely onto the enterprise market.”
Phones using Microsoft’s Windows operating system accounted for just 2.2% of worldwide shipments last year vs. 81.2% for Google’s Android and 15.8% for Apple’s iOS, according to the IDC Mobile Phone Tracker.