Microsoft cutting another 1,850 Nokia-related jobs
26 May 2016
Microsoft gave further indication on Wednesday that it is scaling down its ill-fated venture into the handset business through the acquisition of Finland's Nokia, saying is making further cuts to what is left of its ailing smartphone business, as sales of the devices continue to fade.
Without actually confirming that it is shutting down its Lumia line of phones, the company said on Wednesday that it would eliminate up to 1,850 jobs as a result of the cutbacks, about 1,350 of them in Finland, where the mobile business that Microsoft acquired from Nokia a couple of years ago originated. Microsoft will take an accounting charge of $950 million related to the cuts, it said.
In an email to all Microsoft employees sent early Wednesday, Terry Myerson, executive vice president of the company's Windows and devices group, described the cuts as ''incredibly difficult'' but said that Microsoft needed ''to be more focused in our phone hardware efforts''.
As downbeat a note as the layoffs were for Microsoft's smartphone business, there isn't much left of the army of people it once had working on the devices.
About 25,000 workers joined Microsoft as a result of the company's acquisition of Nokia's handset business, but Microsoft quickly felt pressure to cut costs as phone sales struggled. In 2014, Microsoft announced it was cutting 18,000 jobs, most of them related to the Nokia deal.
Last year, it eliminated an additional 7,800 jobs, trimmed the number of smartphones it offered and took a $7.6 billion accounting charge, writing off nearly the entire value of the Nokia deal. Microsoft has about 110,000 total employees.
The acquisition of Nokia's mobile business will go down as one of the costlier missteps in Microsoft's history. The company's previous chief executive, Steven A. Ballmer, made the deal with the goal of transforming Microsoft, a company that was struggling to keep pace with the likes of Apple and Google in the mobile business.
But the fortunes of Nokia, a once-mighty player in mobile, had already soured as sales of traditional cellphones lost ground to software-rich smartphones. The combination of its hardware expertise and Microsoft's software skills never produced the results Microsoft had hoped for.
While some of its phones were well reviewed, independent app developers treated Microsoft's smartphones as an afterthought, making it less attractive to customers.
In the first quarter of 2015, about 2.5 per cent of smartphones shipped ran Microsoft's Windows software, according to Gartner, the technology research firm. By the first quarter of this year, the figure had fallen to less than 1 per cent.
Since selling its phone business to Microsoft, Nokia - a company founded in the 19th century that once made rubber boots - has transformed itself into a telecommunications equipment maker that supplies to the likes of AT&T and Verizon Wireless.
Yet the once-powerful Finnish phone maker cannot fully give up the ghost of its smartphone past. Last week, Nokia announced that it had licensed its brand to Foxconn, the Taiwan tech giant, and HMD Global, a Finnish company, which plan to manufacture a new line of phones under the Nokia name. (See: Foxconn, HMD strike deal for Nokia comeback)
Satya Nadella, Microsoft's current chief executive, has taken a different approach to the mobile business than his predecessor, pushing the company's development teams to release mobile apps, including its Office franchise, for the iPhone and the Android operating system from Google.
Microsoft has also created a common Windows operating system that runs on all of its devices, including phones, tablets like Surface and the Xbox One game console. The long-term goal of unifying the software for all the devices is to get developers more interested in Windows by giving them a much bigger audience to reach with their apps.
Microsoft said it would introduce new smartphones in the future, suggesting that they would be aimed at business customers, who have shown more interest in the company's devices.
''When I look back on our journey in mobility, we've done hard work and had great ideas but have not always had the alignment needed across the company to make an impact,'' Myerson wrote in his e-mail to Microsoft employees.
