Microsoft acquired Nokia’s Devices & Services business in April 2014 for US$7.2 billion. Only months later, it announced major job cuts in its new business unit. The company today announced further restructuring with a 7,800 job reduction primarily in its phone business to “better focus and align resources.” It will also 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 and a restructuring charge of approximately US$750 million to US$850 million.
“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.”
The move comes after a recent senior management team shuffle that saw both former Nokia CEO Stephen Elop and Jo Harlow who headed up Microsoft’s new phone business leave the company.
In an email sent to employees, Microsoft CEOSatya Nadella outlined the new direction for its hardware business:
I am committed to our first-party devices including phones. 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.
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. We plan to narrow our focus to three customer segments where we can make unique contributions and where we can differentiate through the combination of our hardware and software. 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.
In the longer term, Microsoft devices will spark innovation, create new categories and generate opportunity for the Windows ecosystem more broadly. Our reinvention will be centered on creating mobility of experiences across the entire device family including phones.
It’s not immediately clear what Microsoft’s promised “more effective and focused phone portfolio” will look like. It is likely though that we will see the company release fewer smartphones. The move will presumably not affect its nascent wearables efforts but that remains to be seen as well.
This latest Microsoft restructuring is expected to be substantially complete by end of the calendar year and fully complete by the end of the company’s fiscal year.