Microsoft Corp. has announced its plans to restructure the company’s phone hardware business, Nokia, to better focus and align resources. The future prospects for the Phone Hardware segment are below original expectations.
Microsoft also announced the reduction of up to 7,800 positions, primarily in the phone business. As a result, the company will record an impairment charge of approximately $7.6 billion related to assets associated with the acquisition of the Nokia Devices and Services (NDS) 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.
“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. 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,” said Microsoft CEO Satya Nadella.
“In the near-term, we’ll run a more effective and focused phone portfolio with better products and speed to market given the recently formed Windows and Devices Group, while retaining capability for long-term reinvention in mobility.”
“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 centred on creating mobility of experiences across the entire device family including phones.”
China’s news agency Xinhua reported that Microsoft will dismiss 2,300 employees in its move to downsize mobile phone operations in Finland (the company was quoted by Finnish media). Microsoft is pulling out completely from the southwestern Finnish town of Salo, which was the birthplace of the boom of Finnish mobile phone industry in 1990s. The unit in Espoo near Helsinki will concentrate on high-end phones, applications and design. Medium-priced phones will be designed in Tampere, central Finland. A unit for low-end mobile phones will continue in Beijing, China, with reduced manpower.
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 NDS business. Based on the prospects for the Phone Hardware segment that are below original expectations, 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.
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