A few years after taking a $US900 million slug on the bold failure that was the Surface RT tablet, Microsoft has suffered another painful hit in its devices portfolio. The company is cutting approximately 1850 jobs around the world and taking a $US950 million impairment charge on its smartphone hardware business, and this marks effectively the final nail in the coffin of the once powerful Nokia.
Microsoft’s acquisition of Nokia’s devices and services division in 2013 cost it $US7.1 billion, and in 2015 the software giant laid off 7800 mobile devices staff at a cost of $US7.6 billion. The former Nokia feature phone segment of that business was recently sold off for a fire sale price of $US350 million, and today’s announcement suggests that Windows 10 Mobile hardware might not be on the cards at Microsoft much longer.
This theory makes sense. Silicon Valley darling Google has been traditionally shy about building its own hardware, the Nokia acquisition was notoriously rocky, and although Microsoft’s 2-in-1 convertible Surface tablets have been extremely successfully and critically acclaimed, the Surface RT showed the danger of mis-stepping in consumer technology hardware.
Microsoft CEO Satya Nadella is still talking up the company’s software chops, and it’s in those areas that it will continue to invest: “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. We will continue to innovate across devices and on our cloud services across all mobile platforms.”
Microsoft says the cutbacks should be largely complete by the end of 2016, and fully closed off by the end of July next year. More detail will be forthcoming in the company’s mid-July fourth quarter earnings announcement and annual report for 2016.