Continuing with its cost cutting drive, Microsoft Inc. has announced another round of lay-offs which will affect about 7,800 employees. A letter from Satya Nadella, CEO, Microsoft confirmed the number while talking about impending changes in the company’s phone and display advertising announcements.
We anticipate that these changes, in addition to other headcount alignment changes, will result in the reduction of up to 7,800 positions globally, primarily in our phone business. We expect that the reductions will take place over the next several months.
The lay-offs come in addition to the 18,000 job cuts that were announced back in 2014 and are still in process. While the previous cut was focused mainly on employees belonging to the less profitable departments of the Software giant such as its smartphone business acquired from Nokia along with Microsoft’s hardware section, most of the 7,800 will come from its phone division.
The news certainly comes as a shock to employees — which numbered about 118,000 in June — but is not entirely a surprise. An earlier e-mail from Satya Nadella which supposedly meant to encourage employees to exert their full effort also hinted at impending job cuts.
The company would need to make some tough choices in areas where things are not working and solve hard problems in ways that drive customer value.
Where “areas where things are not working” obviously refers to departments where the company is not meeting the expected profit goals while “hard choices” are basically lay-offs, among other things.
The development comes even as Microsoft is facing hardships in several of it’s highly ambitious projects. The company has already decided to sell it’s online display advertising business to AOL, while it narrows its focus on search. Things are also not going as well as expected in the smartphone niche, with the $7.2 Billion Nokia acquiring deal turning into a loss maker even as windows devices fail to compete against Android and iOS smartphones.
While Microsoft is not about to cut losses and leave the smartphone business — as expected by many — the company has announced impairment charges of $7.6 billion due to a write down of the company’s acquisition of Nokia’s Devices and Services back in 2014 along with restructuring charge of approximately $750 million to $850 million. Whew! those are some big numbers.
Although a statement by the company said that the future prospects for the Phone Hardware segment are below original expectations, attempts to restore the smartphone business are still under way with the latest version of windows hitting the markets on the 29th of July. In his letter announcing the impending lay-offs, the CEO also talked about the need to create a vibrant windows ecosystem while focusing on first party devices.
I am committed to our first-party devices including phones. However, we need to focus our phone efforts in the near term while driving reinvention. We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem that includes our first-party device family.