Microsoft share price steady, cuts 7 800 jobs and writes down most of Nokia acquisition value

Microsoft Corp acknowledged on Wednesday its failure to become one of the smartphone worlds leading players little over a year after its controversial acquisition of Nokias handset unit.

The software maker announced it would slash 7 800 jobs, or nearly 7% of its total headcount, and write down $7.6 billion related to its Nokia phone unit purchase. At the time, Microsoft reported the value of the acquisition at $7.2 billion, which was later revised to $9.5 billion, including the assumption of $1.5 billion in cash.

Most of the job cuts will be in its mobile-phone operation, underlining the companys efforts to refocus from hardware to software and cloud. About a third of the layoffs will be in Finland, where Microsoft will shut down a product development unit.

“In practice, this means the end of Nokia’s old business in Finland,” said Finnish Prime Minister Juha Sipilä in a press conference on Wednesday.

This is the second series of job cuts at Microsoft since Satya Nadella succeeded Steve Ballmer as CEO in February 2014. A company-wide restructuring last year led to the axing of 18 000 positions after the Redmond, Washington, giants workforce was inflated by 25 000 following the Nokia purchase. Most of the layoffs were tied to overlapping positions resulting from the acquisition. The company had more than 118 000 employees worldwide as of March 31st.

Microsoft also said it would take a $750-$850-million restructuring charge in its fourth quarter ended June 30th, but the layoffs are expected to lead to a $1-billion reduction in annualized operating costs, according to analysts.

Still, although Microsoft lost an average of 12 cents from each phone it built before it even left the factory in the quarter ended March 31st, it will not abandon smartphone production entirely, rather embark on a new and less ambitious strategy focused on business customers. The company will likely trim its smartphone line-up and exit some markets, as well as reduce the number of carriers it supplies.

“Well run a more effective and focused phone portfolio business while retaining capability for long-term reinvention in mobility,” Mr. Nadella said in a statement. He added that Microsoft would aim to encourage more smartphone makers to run Windows on their models, although until now the companys homegrown phones have made up the majority of Windows handsets.

Microsoft Corp settled 0.14% lower at $44.24 on the NASDAQ on Wednesday, marking a year-over-year jump of 5.9% and a year-to-date drop of 4.76%. The company is valued at $357.88 billion. According to CNN Money, the 30 analysts offering 12-month price forecasts for Microsoft have a median target of $51.00, with a high estimate of $60.00 and a low estimate of $37.00. The median estimate represents a +15.28% increase from the last price of $44.24.