Ctrl-Alt-Delete: Microsoft writes off Nokia, cuts 7,800 jobs
Microsoft is rebooting its phone business, writing off $7.6 billion from last year’s acquisition of Nokia and laying off thousands of workers in US and Finland. The company will also spend up to $850 million on restructuring.
CEO Satya Nadella announced the layoffs on Wednesday in an email to employees, calling the move a “fundamental restructuring of our phone business.” Assets associated with 2014’s acquisition of Nokia Devices and Services will be written off as an “impairment charge,” an accounting term for a worthless goodwill expense.
“I am committed to our first-party devices including phones,” Nadella wrote in the memo. “However, we need to focus our phone efforts in the near term while driving reinvention. We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem that includes our first-party device family."
Less than 15 months after Microsoft acquired Nokia Devices & Services, they appear to have lost ~$10B on the deal. pic.twitter.com/Ch4LjYvGh7
— Michael DeGusta (@degusta) July 8, 2015
Microsoft announced the $7.2 billion takeover of Nokia in September 2013, finalizing the acquisition in April. According to some estimates, the venture may have lost the company as much as $9.7 billion since.
Nadella, who took over as CEO in February 2014, has been trying to salvage the company’s fortunes. Over the past year, Microsoft has laid off 18,000 workers, cutting operations deemed insufficiently profitable. The company has around 118,000 employees worldwide.
Some 2,300 of the 7,800 layoffs announced in the memo will be in Finland, where Nokia is based. In a statement, the Finnish government said it was “disappointed with Microsoft's decision” and will consider offering assistance to the workers affected.
“The loss of so many jobs is very sad for the whole society and for the individuals affected,” the government in Helsinki said, according to the BBC.
Microsoft dumps Nokia and writes off $7 billion. Good move by Satya to correct past errors. Acquiring Nokia was a big Ballmer mistake.
— Mohan Sawhney (@MohanSawhney) July 8, 2015
Nokia pioneered the GSM mobile phone standard and used to dominate the mobile device market in Europe and much of the world until 2007, when Apple introduced the first iPhone. By 2011, Apple’s skyrocketing sales had surpassed Nokia’s, as the Finnish company found itself unable to compete in the “smart phone” market.
Steve Ballmer, Microsoft CEO at the time, hoped to use some of Nokia’s remaining market presence to stay in the race, increasingly dominated by Apple and Samsung. Despite the promising features of Nokia’s Lumia product line and the Windows Phone operating system, Microsoft’s market share remained in low single digits – just over 3 percent this year – as consumers flocked to phones running Apple’s iOS and Google’s Android instead.
Microsoft (and Balmer) could have bought 4 NBA teams with the money they wasted on Nokia.
— James Woollard (@BritVoxUS) July 8, 2015
While cutting its losses with Nokia, Microsoft has been expanding its software presence in both iOS and Android ecosystems, and is reportedly making deals with manufacturers of Android smartphones and tablets to bundle some of its programs with their hardware.
Wednesday’s announcement has caused much speculation about what else Nadella may decide to throw overboard, from Microsoft’s customer relationship management division Dynamics (6 percent market share) to retail stores, Surface tablets, Bing search engine and the still-popular Xbox gaming console.