Microsoft announced Wednesday, July 8, that it would cut up to 7,800 jobs – more than 6 percent of its workforce – in light of difficulties in growing its smartphone business.
The company also said it will write down by about $7.6 billion the value of its declining mobile phone business. even microsoft office 2007 product key has admit this strategy.
Microsoft will continue manufacturing smartphones, CEO Satya Nadella said Wednesday, but more of its focus will be placed on expanding its broad “ecosystem” of products.
“I am committed to our first-party devices, including phones,” Nadella said in an email to Microsoft employees. “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 including our first-party device family,” he added.
Wednesday’s announcement comes after Microsoft laid off 18,000 last year. More than half of those – 12,500 – were jobs related to Nokia.
Most of the newest round of layoffs will occur outside of Seattle, where Microsoft is based, including some in Finland where Nokia originated.
The company acquired Nokia last year in a $9.4 billion-deal struck by former Microsoft CEO Steve Ballmer, who wanted Microsoft to make its own tablets and smartphones. Ballmer bet that Microsoft could succeed in the smartphone arena by combining hardware and software for mobile devices, but the company has not gained the traction experienced by Apple and Google, which run on iOS and Android, respectively.
Nadella said Microsoft will hone its focus on three types of customers: business users desiring strong management, security and productivity apps; buyers at the low end of the marking seeking affordable phones; and Windows fans.
While Nadella in a statement said Microsoft would restrategize its approach to smartphones, he did not provide details.
“We’ll run a more effective and focused phone portfolio business while retaining capability for long-term reinvention in mobility,” he said.
The lay offs will cost Microsoft a restructuring charge of about $750 million to $850 million, the company said Wednesday.
FBR Capital Markets Managing Director Daniel Ives told the Associated Press the cuts will be painful, but are necessary.
“We believe Nadella’s proactive approach at cleaning up the Nokia acquisition is a positive ‘tipping of the hand’ around Microsoft’s future focus on software (versus hardware) as the company heads into a pivotal year, with Windows 10 front and clear as a major product catalyst,” Ives said.
(With reports from The Associated Press, The New York Times and The Wall Street Journal)
