Is Microsoft’s ‘streamlining’ of handset biz a face-saving exit route?
Software giant Microoft on Wednesday said it will “streamline” its smartphone hardware business that will impact up to 1,850 jobs. As a result of this, the Redmond-headquartered company will record an impairment and restructuring charge of approximately $950 million, of which approximately $200 million will relate to severance payments. Up to 1,350 jobs will be cut at Microsoft Mobile Oy in Finland, while another 500 jobs globally will be reduced. Microsoft had acquired Nokia’s phone business for $7.2 billion two years ago under its then CEO, Steve Ballmer.
However, last year it wrote off $7.6 billion last year and cut 7,800 jobs to re-focus its phone efforts, making its total writedowns higher than its original cost of acquisition. Employees working for Microsoft Oy, a separate Microsoft sales subsidiary based in Espoo, are not in scope for the planned reductions, Microsoft said in a statement. “We are focussing our phone efforts where we have differentiation with enterprises that value security, manageability and our Continuum capability, and consumers who value the same,” Microsoft CEO Satya Nadella said.
He further said: “We will continue to innovate across devices and on our cloud services across all mobile platforms”. The reductions are expected to be substantially complete by the end of the calendar year and fully completed by July 2017, the end of the company’s next fiscal. Last week, Microsoft had agreed to sell the feature phone business that it acquired from Nokia for $350 million to Foxconn, the Taiwenese manufacturer. About 4,500 employees would be transferred from Microsoft as part of that deal. The acquisition of Nokia’s handset business was seen as a move to help Microsoft compete with the likes of Google and Apple in the mobile space.
However, the bet has not paid off for Microsoft, which currently has less than one per cent share of the global smartphone operating systems market. According to research firm Gartner, Android had 84.1 per cent share of the global market, while iOS (Apple) had 14.8 per cent share.