Announces restructuring of phone hardware business and loss of almost 8,000 jobs
Microsoft has announced plans to restructure the company’s phone hardware business, which was formerly Nokia’s Devices and Services business, to better focus and align resources. Microsoft also announced the reduction of up to 7,800 positions, primarily in the phone business.
As a result, the company has admitted its Phone Hardware segment will underperform based on previous expectations ; it will record an impairment charge of approximately $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 $750 million to $850 million.
Today’s announcement follows recent moves by Microsoft to better align with company priorities, including recent changes to Microsoft’s engineering teams and leadership, plans to transfer the company’s imagery acquisition operations to Uber, and shifts in Microsoft’s display advertising business that enable the company to further invest in search as its core advertising technology and service.
In mid June Microsoft announced that the changes to its engineering teams and leadership included the new Windows and Devices Group (WDG), focused on enabling more personal computing experiences powered by the Windows ecosystem. This new team combines the engineering efforts of the current Operating Systems Group and Microsoft Devices Group. As a result of the changes, Stephen Elop among others is set to leave the business.
Today’s plans were outlined in an email 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.”
Microsoft will record a charge in the fourth quarter of fiscal 2015 for the impairment of assets and goodwill in its Phone Hardware segment, related to the former Nokia Devices and Services business. This charge has no impact on cash flow from operations and is non-deductible for income tax purposes.
Based on the new plans, the future prospects for the Phone Hardware segment are below original expectations. Accordingly, the company concluded that an impairment adjustment of its Phone Hardware segment assets and goodwill of approximately $7.6 billion is required.
The actions associated with today’s announcement are expected to be substantially complete by the end of the calendar year and fully completed by the end of the company’s fiscal year.
More information about these charges will be provided in Microsoft’s fourth-quarter earnings.
