Microsoft to write-down $950 mn from handset business
26 May 2016
Microsoft Corp will write-down $950 million from its handset business, as it announced deeper cuts to its smartphone business, only two years after its acquisition of handset maker Nokia in an attempt to take on market leaders Apple and Samsung.
Microsoft said in a statement it will record an impairment and restructuring charge of approximately $950 million, of which approximately $200 million will relate to severance payments.
The US company had announced on Wednesday 1,850 jobs cuts, mostly in Finland, without disclosing how many employees currently worked on smartphones in the group as a whole.
According to a Finnish union representative who spoke to Reuters the cuts would essentially put an end to Microsoft's development of new phones.
Reuters quoted Kalle Kiili, a shop steward, as saying his understanding was that Windows 10 would go on as an operating system, but there would be no more phones made by Microsoft.
Microsoft said in a statement it would continue to develop the Windows 10 platform and support its Lumia smartphones, but did not specify whether it would develop new Windows phones.
"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," said Satya Nadella, chief executive officer of Microsoft. "We will continue to innovate across devices and on our cloud services across all mobile platforms."
Microsoft anticipates this will result in the reduction of up to 1,350 jobs at Microsoft Mobile Oy in Finland, as well as up to 500 additional jobs globally. Employees working for Microsoft Oy, a separate Microsoft sales subsidiary based in Espoo, are not in scope for the planned reductions.
As a result of the action, Microsoft will record a charge in the fourth quarter of fiscal 2016 for the impairment of assets in its More Personal Computing segment, related to these phone decisions.
The actions associated with today's announcement 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 year.
More information about these charges will be provided in Microsoft's fourth-quarter earnings announcement on 19 July, 2016, and in the company's 2016 Annual Report on Form 10-K.