Microsoft has announced plans to streamline the smartphone hardware business it bought from Nokia in 2014 for $7.2bn.
The changes will likely impact up to 1,850 jobs, with Microsoft announcing that it will record an impairment and restructuring charge of approximately $950m, of which approximately $200m will relate to severance payments.
The bulk of the job cuts will affect a mobile technology division at Microsoft Mobile Oy in Finland with the company anticipating the reduction of up to 1,350 jobs, as well as up to 500 additional jobs globally.
Employees working for Microsoft Oy, a separate sales subsidiary based in Espoo, the second largest city in Finland, will not be affected by the job cuts.
Rocky road for Microsoft smartphones
Microsoft acquired Nokia’s phone business in 2014 in the hope of expanding its share of the fast-growing mobile tech industry.
But the software and technology company failed to have the same success in the mobile phone industry as it had previously with computer software, struggling to compete in a business sector dominated by rivals Apple, Google and Samsung.
Microsoft could not continue Nokia’s established success, with the Finnish company the world’s leading mobile phone maker from 1998 until 2011.
Microsoft failed to turn the business around and took a $7.5bn write down last year, resulting in these latest job cuts to the company’s smartphone division.
Nokia revived for 3rd time by FoxConn
The job cuts come after Microsoft announced last week the sale of its feature phone business for $350m to a new Finnish company HMD Global and its Taiwanese partner, FIH Mobile of FoxConn Technology Group. The two companies are to jointly begin manufacturing headsets and tablets under the old Nokia name again.
Chief executive officer of Microsoft, Satya Nadella, said the company would continue to be involved in the communications industry.
“We are focusing our phone efforts where we have differentiation – with enterprises that value security, manageability and our Continuum capability, and consumers who value the same,” he said.
“We will continue to innovate across devices and on our cloud services across all mobile platforms.”
As a result of the streamlining of its smartphone hardware business, Microsoft will record a charge in the fourth quarter of fiscal 2016 for the impairment of assets in its More Personal Computing segment.
The bulk of the streamlining process is expected to be complete by the end of the calendar year and fully completed by July 2017.
More information about these charges are to be provided in Microsoft’s fourth-quarter earnings announcement on July 19, 2016 and in the company’s 2016 Annual Report on Form 10-K.