July 8, 2015
Microsoft Corp. today announced plans to restructure the company’s phone hardware business in order “to better focus and align resources.” The company also announced the reduction of up to 7,800 positions, primarily in the phone business.
As a result, Microsoft said it will record an impairment charge of approximately US$7.6 billion related to assets associated with the acquisition of the Nokia Devices and Services (NDS) business in addition to a restructuring charge of approximately US$750 million-$850 million.
Today’s plans were outlined in an e-mail from Microsoft CEO Satya Nadella to Microsoft employees.
“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,” Nadella said. “In the near-term, we’ll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility.”
More information about these charges will be provided in Microsoft’s fourth-quarter earnings announcement on July 21.
When the purchase was first announced two years ago, Ovum analyst Tony Cripps wrote that “Microsoft’s acquisition of Nokia’s Devices & Services business for $7.2bn marks a highly significant change of trajectory for the US-based software giant, which will now face industry rivals Apple, Google, and Samsung on more equal terms. It also represents an indicator for the future of the consumer tech industry, and is a symbolic end to the mobile phone industry that we’ve previously known.
“The sale of Nokia’s mobile phone business conclusively demonstrates the need for major consumer technology vendors to create ever deeper and wider offerings for consumers and ecosystem participants in terms of their device, platform, and service offerings. This approach is no longer simply an option but is a prerequisite for competing successfully in this highly converged market.”