Microsoft’s $9.5 billion acquisition of the Nokia phone handset business last year is now officially a bust. The software giant says this morning that it will cut 7,800 jobs — about 7% of its workforce– and take a $7.6 billion impairment charge related to the purchase as part of a larger corporate restructuring.
“We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem including our first-party device family,” CEO Satya Nadella told employees in an email. “In the near-term, we’ll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility.”
Today’s announcement isn’t a complete surprise: Last month former Nokia CEO Stephen Elop left Microsoft. Nadella told employees then that the company planned to “make some tough choices in areas where things are not working and solve hard problems in ways that drive customer value.”
Microsoft has never been able to recover from its late start in the mobile phone business. Windows phones were expected to end this year with 3.2% of the world’s market share — vs. 74.9% for Google’s Android and 16.4% for Apple’s iOS — according to the latest IDC Worldwide Quarterly Mobile Phone Tracker.
The new layoffs come nearly a year after the CEO slashed 18,000 positions — with Nokia hit hardest. It was Microsoft’s biggest job cut since 2009 as Nadella tried to shift Microsoft’s focus away from its longtime strength in PC software toward other areas that show more promise.
The company says it’s taking the writedown because, with the change in direction, “future prospects for the Phone Hardware segment are below original expectations.”
Nadella insists that he’s still “committed to our first-party devices including phones. However, we need to focus our phone efforts in the near term while driving reinvention.”