Only one year removed from announcing a massive round of job cuts impacting 18,000 employees, Microsoft is letting thousands of jobs walk out the door once again.
On Wednesday morning, Microsoft says it will slash up to 7,800 additional jobs. Most of the cuts are connected to the company’s mobile phone business.
Microsoft will also take an impairment charge of $7.6 billion related to its acquisition of Nokia’s handset business for more than $7 billion, along with a restructuring charge ranging between $750 million and $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,” said Microsoft CEO Satya Nadella in an email to employees Wednesday. “In the near-term, we’ll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility.”
Shares of Microsoft are up more than 1% at $44.73 in morning trading. The New York Times first broke the news of the huge job cuts. The cuts and large sum of charges will be complete by the end of Microsoft’s fiscal year, the company said.
The job cuts are tied to Microsoft’s big gamble to become a dominant force in the Smartphone market. Last year, it completed its acquisition of Nokia’s handset business after partnering on the Lumia line of Smartphones running Microsoft’s Windows Phone OS.
Microsoft’s acquisition of Nokia’s handset business in 2013, one of the last acts of outgoing CEO Steve Ballmer, has been a “head-scratcher” from the beginning, says FBR Capital Markets analyst Daniel Ives.
“Nadella inherited this headache,” says Ives. “This is Nadella, after a year and a half, (trying) to cut the cord as much as possible to the Nokia business.”
Mobile remains a core part of Microsoft’s strategy, but Ives notes the company will focus more on “the software piece around mobile rather than dedicating resources and employees toward hardware,” such as its line of Windows phones.
In 2014, Microsoft CEO Satya Nadella revealed the company was cutting up to 18,000 jobs as part of a larger plan to streamline the organization. “My promise to you is that we will go through this process in the most thoughtful and transparent way possible,” said Nadella in a memo to employees when the layoffs were announced.
These new cuts arrive as Microsoft prepares for one of its biggest product launches in recent years and what will hopefully catapult them back into the conversation with Apple, Windows 10. The operating system that will work across PCs and mobile devices launches later this month.
It’s also the latest move by Nadella to shift the company’s focus toward key businesses, including cloud computing, Microsoft’s Office software suite and Windows 10. “They’re going through a major sea change at Microsoft in terms of restructuring and strategic focus,” says Ives.