Microsoft writes off $7.6 bn in Nokia deal; to cut 7,800 jobs


New York: In a major restructuring of its mobile devices business, US tech giant Microsoft Wednesday said it is writing off USD 7.6 billion it spent on acquiring Nokia and will cut 7,800 jobs, but was silent on India impact.

“I want to update you on decisions impacting our phone business… We anticipate that these changes, in addition to other headcount alignment changes, will result in the reduction of up to 7,800 positions globally, primarily in our phone business,” Microsoft CEO Satya Nadella said in an email to employees.

He said that restructuring of phone business has led to an impairment charge of approximately USD 7.6 billion related to assets associated with the acquisition of the Nokia Devices and Services business in addition to a restructuring charge of approximately USD 750 million to USD 850 million.

Microsoft had acquired mobile devices business from Nokia in a USD 7.2 billion deal which concluded in April last year.

This is the second round of major job cut after Nadella took over as Microsoft CEO. About a year ago he announced axing up to 18,000 jobs, biggest cuts in its 39-year history.

After fresh round of job cuts, Nadella said that there is need to focus on 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,” he said.

As per IDC report for the first quarter of 2015, mobile phones based on Android operating system dominated the market with 78 percent share, followed by Apple’s iOS. Windows-based phones stood at third spot with market share of 2.7 percent.

“In the near term, we will run a more effective phone portfolio, with better products and speed to market given the recently formed Windows and Devices Group,” Nadella said.

As per the new strategy, Microsoft plans to narrow focus to three customer segments where it can make unique contributions and differentiate.

The company’s employee strength in India could not be ascertained.

“We’ll bring business customers the best management, security and productivity experiences they need; value phone buyers the communications services they want; and Windows fans the flagship devices they?ll love,” Nadella said.

In the longer term, he said, Microsoft devices will spark innovation, create new categories and generate opportunity for the Windows ecosystem more broadly and it will not only focus on mobile phones but on entire range of devices.

As of June 30, 2014, Microsoft employed 128,000 people on a full-time basis including 25,000 employees transferred as part of the Nokia Devices and Services (NDS) acquisition in April, 2014.

Microsoft reduced NDS employees by 50 percent by announcing reduction of 12,500 in the segment. The further reduction of 7,800 employees significantly reduces number of employees transferred from Nokia to Microsoft.

The company did not include Nokia’s Chennai plant as part of the deal, which at that time employed around 6,600 people.

Nadella said Microsoft’s search engine ‘Bing’ will now power search and search advertising across the AOL portfolio of sites, in addition to the partnerships with Yahoo, Amazon and Apple.

“Concentrating on search will help us further accelerate the progress we’ve been making over the past six years. Last year Bing grew to 20 percent query share in the US while growing our search advertising revenue 28 percent over the past 12 months,” he said.

Nadella said that Microsoft transferred some of its imagery acquisition operations to Uber and it will continue to source base mapping data and imagery from partners.

“This allows us to focus our efforts on delivering great map products such as Bing Maps, Maps app for Windows and our Bing Maps for Enterprise APIs,” he said.

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