Microsoft confirmed its anticipated job cuts as it looks to “simplify its organisation and align the recently acquired Nokia Devices & Services business with the company’s overall strategy” – at the cost of 18,000 positions over the next year.
The move is Microsoft’s largest ever round of layoffs and affects 14 per cent of its overall workforce.
The company said 12,500 professional and factory positions will be taken out through “synergies and strategic alignment” of the former Nokia business acquired early this year. It is believed that Microsoft gained around 30,000 staff from the deal, meaning the cuts represent a significant portion of this number.
Notably, in an email to staff, Satya Nadella, CEO of Microsoft, said that in order to “win in the higher price tiers” the company’s devices activities will “focus on breakthrough innovation that express and enlivens Microsoft’s digital work and digital life experiences”.
And Nadella has also taken his axe to the Android-powered Nokia X product line, with “select Nokia X product designs to become Lumia products running Windows”.
“This builds on our success in the affordable smartphone space and aligns with our focus on Windows Universal Apps,” he wrote.
Stephen Elop, the Microsoft-turned-Nokia-turned-Microsoft executive who heads up the device activities, wrote that it is “particularly important to recognise that the role of phones within Microsoft is different than it was within Nokia.”
“Whereas the hardware business of phones within Nokia was an end unto itself, within Microsoft all our devices are intended to embody the finest of Microsoft’s digital work and digital life experiences, while accruing value to Microsoft’s overall strategy,” he continued.
Microsoft will merge the former Smart Devices and Mobile Phones business units of Nokia into one, under current smartphone head Jo Harlow. This group will be tasked with “the success of our Lumia products, the transition of select future Nokia X products to Lumia and for the ongoing operation of the first phone business”.
Phone engineering efforts will be concentrated in two facilities in Nokia’s home of Finland – Salo (for high-end Lumia) and Tampere (for affordable devices). Engineering work will be ramped down on Oulu (Finland) and reduced in Beijing and San Diego, which will have focus on affordable devices in Beijing and supporting specific US requirements in San Diego.
Sites in Espoo and Lund (Sweden) will focus on application software development.
Microsoft expects to incur charges of between $1.1 billion and $1.6 billion over the next four quarters, including $750 million to $800 million for severance and related benefit costs, and $350 million to $800 million of asset-related charges.
Nadella wrote: “We are moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months.”
He also said that while cuts are being made, roles are being added in “other strategic areas”.
Nadella noted that when the company reports its next quarterly results on 22 July, he will “share further specifics on where we are focusing our innovation investments”.