Microsoft Corp. said on Wednesday will scale down its struggling Nokia mobile phone business, eliminating 7,800 employees in the process, and write down $7.6 billion of the value related to this unit.
In a statement on its website, Microsoft CEO Satya Nadella said the move allows the company to better focus its priorities in other businesses.
"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," Nadella said.
Microsoft said it will incur a restructuring charge between $750 to $850 million in the fourth quarter of fiscal 2015 for the impairment of assets and goodwill in its Phone Hardware segment, related to the NDS business. It, however, clarified, this has no cash flow impact is non-deductible.
A Reuters story noted that the phone hardware business will bear of the brunt of the layoffs, and that Microsoft will close product development in Finland, Nokia's home base, citing another report. The article noted that Microsoft had been expected to write off its Nokia handset unit, as the business was struggling to in the smartphone market dominated by Apple and Samsung.
The wire agency said the Nadella has implemented two job cuts since being hired as CEO in February 2014, with 18,000 planned to be laid off last year. Investors, however, appear to be supporting Nadella's moves as Microsoft shares rose by 1.4 percent on Wednesday and 22 percent since the company's new CEO took over in January,
Microsoft, then under Steve Ballmer, acquired Nokia Device and Service business in April 2014 to deploy is Windows Phone software, which had failed to lure users from more established competitors.
